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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2004



Commission File No. 1-14473



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Sky Financial Group, Inc.

(Exact Name of Registrant as Specified in its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Ohio                                                           |  | 34-1372535                          
|(State of Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification Number)
|                                                               | 
|221 South Church Street, Bowling Green, Ohio                   |  | 43402                               
|(Address of Principal Executive Office)                        |  | (Zip Code)                          



(419) 327-6300

(Registrants Telephone Number)



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Securities registered
pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:

Common Stock, without par value

(Title of class)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x    No ̈



State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2004, the last business day of the registrants most recently completed second
fiscal quarter: $2,039,567,405.



The number of shares
outstanding of the Registrants common stock, without par value was 106,567,699 at February 11, 2005.



Certain specifically designated portions of Sky Financial Group, Inc.s definitive Proxy Statement dated March 7, 2005 for its 2005 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Form 10-K.



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##### Table of Contents

INDEX



|              |  |                                                                                                              |  |          
|------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---------
|              |  |                                                                                                              |  | 10-K Page
|              |  |                                                                                                             
|PART I        |  |                                                                                                              |  |          
|              |  |                                                                                                             
|Item 1.       |  | Business                                                                                                     |  | 3        
|              |  |                                                                                                             
|Item 2.       |  | Properties                                                                                                   |  | 7        
|              |  |                                                                                                             
|Item 3.       |  | Legal Proceedings                                                                                            |  | 7        
|              |  |                                                                                                             
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                                          |  | 8        
|              |  |                                                                                                             
|PART II       |  |                                                                                                              |  |          
|              |  |                                                                                                             
|Item 5.       |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 9        
|              |  |                                                                                                             
|Item 6.       |  | Selected Financial Data                                                                                      |  | 10       
|              |  |                                                                                                             
|Item 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                         |  | 11       
|              |  |                                                                                                             
|Item 7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 29       
|              |  |                                                                                                             
|Item 8.       |  | Financial Statements and Supplementary Data                                                                  |  | 30       
|              |  |                                                                                                             
|Item 9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 63       
|              |  |                                                                                                             
|Item 9A.      |  | Controls and Procedures                                                                                      |  | 63       
|              |  |                                                                                                             
|Item 9B.      |  | Other Information                                                                                            |  | 65       
|              |  |                                                                                                             
|PART III      |  |                                                                                                              |  |          
|              |  |                                                                                                             
|Item 10.      |  | Directors and Executive Officers of Registrant                                                               |  | 65       
|              |  |                                                                                                             
|Item 11.      |  | Executive Compensation                                                                                       |  | 66       
|              |  |                                                                                                             
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management                                               |  | 66       
|              |  |                                                                                                             
|Item 13.      |  | Certain Relationships and Related Transactions                                                               |  | 66       
|              |  |                                                                                                             
|Item 14.      |  | Principal Accounting Fees and Services                                                                       |  | 66       
|              |  |                                                                                                             
|PART IV       |  |                                                                                                              |  |          
|              |  |                                                                                                             
|Item 15.      |  | Exhibits and Financial Statement Schedules                                                                   |  | 66       
|              | 
|Exhibit Index |  | 66                                                                                                          
|              | 
|Signatures    |  | 68                                                                                                          





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##### Table of Contents

PART I



Item 1. Business



Sky Financial Group, Inc. (Sky
Financial) is a $14.9 billion financial holding company located in Bowling Green, Ohio that owns one commercial bank primarily engaged in commercial and consumer banking business at over 280 financial centers and 300 ATMs located in Ohio, western
Pennsylvania, southern Michigan, eastern Indiana and northern West Virginia. Sky Financial also operates businesses relating to insurance, trust and other related financial services. During 2004 and 2003, Sky Financial completed the following
acquisitions and divestitures:



| |  | On November 30, 2004, Sky Financial acquired Prospect Bancshares and its wholly-owned subsidiary Prospect Bank (Prospect), a $202 million savings bank located in Worthington, Ohio.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On July 1, 2004, Sky Financial acquired Second Bancorp, Inc. and its wholly-owned subsidiaries, The Second National Bank of Warren and Stouffer-Herzog Insurance Agency, Inc. Second
National Bank was a $2.0 billion commercial bank located in Warren, Ohio.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On March 31, 2004, Sky Financial sold Sky Financial Solutions, Inc., its specialized medical/dental financing unit located in Columbus, Ohio.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  | On October 19, 2003, Sky Financial acquired GLB Bancorp, Inc., a $225 million bank holding company and its wholly-owned subsidiary Great Lakes Bank (GLB), a state member bank
located in Mentor, Ohio.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On April 30, 2003, Sky Financial acquired the outstanding capital stock of Metropolitan Financial Corp, a $1.5 billion savings and loan holding company and its wholly-owned
subsidiary, Metropolitan Bank and Trust Company (Metropolitan) located in Highland Hills, Ohio.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Holding Company



Sky
Financials corporate philosophy is to operate as a locally-oriented, community-based financial service organization, augmented by centralized support in select critical areas. This local market orientation is reflected in its financial centers
and regional advisory boards comprised of local business persons, professionals and other community representatives that assist the bank in responding to local banking needs. Sky Financials bank subsidiary concentrates on client service and
business development, while relying upon the support of Sky Financial for operational functions that are not readily visible to clients and those that are critical to risk management. Asset quality review, mortgage banking activities, financial
reporting, investment activities, internal audit, compliance and funds management are among the functions that are overseen at the holding company level.



Sky Financials market area is economically diverse, with a base of manufacturing, service, transportation and agriculture industries, and thus Sky
Financial is not dependent upon any single industry or employer. Similarly, Sky Financials client base is diverse, and Sky Financial and its subsidiaries are not dependent upon any single industry or upon any single client.



Sky Financials strategic plan includes organic loan and deposit growth
from a focused sales and service culture, increasing fee-based income, strengthening organizational synergies to manage operating costs, maintaining strong asset quality and acquiring financial institutions, branches and financial service
businesses. Sky Financial seeks acquisition partners, which have experienced management, and possess either significant market presence or have potential for improved profitability through financial management, economies of scale and expanded
services.



There is significant competition among commercial
banks in Sky Financials market area. As a result of the deregulation of the financial services industry, Sky Financial also competes with other providers of financial services such as savings and loan associations, credit unions, consumer
finance companies, securities firms, insurance companies, insurance agencies, commercial finance and leasing companies, the mutual funds industry, full-service brokerage firms and discount brokerage firms. Some of Sky Financials competitors,
including certain regional bank holding companies, which have made acquisitions in Sky Financials market area, have greater resources than those of Sky Financial, and as such, may have higher lending limits and may offer other services not
available through Sky Financials bank and non-bank subsidiaries. The bank and non-bank subsidiaries compete on the basis of rates of interest charged on loans, the rates of interest paid for funds, the availability of services and the
responsiveness to the needs of its clients.



Sky
Financials executive offices are located at 221 South Church Street, Bowling Green, Ohio, and its telephone number is 419-327-6300.



The Bank Subsidiary



Sky Bank, headquartered in Salineville, Ohio, had total assets of $14.7 billion at December 31, 2004, and operates financial centers in Ohio, western Pennsylvania, southern Michigan, eastern Indiana and northern West
Virginia. Sky Bank engages in commercial and consumer banking, including the acceptance of a variety of demand, savings and time deposits and the extension of commercial and consumer loans. Prospect Bank was merged into Sky Bank on December 3, 2004,
and Second National Bank was merged into Sky Bank on July 2, 2004.



The
Financial Services Subsidiaries



Sky Trust, National Association (Sky
Trust), a wholly-owned subsidiary of Sky Financial, is headquartered in Pepper Pike, Ohio, and provides a full range of trust and employee benefit services to its commercial and consumer clients.



Sky Insurance, Inc. (Sky Insurance), Maumee, Ohio and Meyer & Eckenrode
Insurance Group, Inc., Carnegie, Pennsylvania, are Sky Financials full service insurance agencies offering a variety of insurance products and services to its clients. Insurance Buyers Service Agency, Inc. was purchased and merged into
Sky Insurance on July 8, 2003. Spencer-Patterson Insurance Agency, Inc. was purchased and merged into Sky Insurance on January 5, 2004. EOB, Inc. was purchased and merged into Sky Insurance on April 1, 2004. Stouffer-Herzog Insurance Agency became
an affiliate of Sky Insurance through the acquisition of Second Bancorp in July 2004. It became part of Sky Insurance in January 2005.



Sky Financial has various other subsidiaries that are not significant to the consolidated entity.



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Competition



The financial services industry is highly competitive. Sky Financial and its subsidiaries compete with other local, regional and national financial service providers,
such as other financial holding companies, commercial banks, savings associations, credit unions, finance companies, leasing companies, and brokerage and insurance firms. The financial services industry is likely to become more competitive as
further technological advances enable more companies to provide financial services on a more efficient and convenient basis.



Supervision and Regulation



Introduction



Sky Financial, its banking subsidiary and many of its non-banking subsidiaries are subject to extensive regulation by federal and state agencies. The regulation of bank holding companies and their subsidiaries is
intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole and not for the protection of security holders. Although Sky Financial is recognized as a financial holding company, most
regulations pertaining to bank holding companies also apply to it. As discussed in more detail below, this regulatory environment, among other things, may restrict Sky Financials ability to diversify into certain areas of financial services,
acquire depository institutions in certain states and pay dividends on its capital stock. It may also require Sky Financial to provide financial support to its banking subsidiary, maintain capital balances in excess of those desired by management
and pay higher deposit insurance premiums as a result of the deterioration in the financial condition of depository institutions in general.



Regulatory Agencies



Holding Company. Sky Financial, as a bank holding company, is subject to regulation under the Bank Holding Company Act of 1956 (BHCA), as amended, and to inspection, examination and supervision by the Board of
Governors of the Federal Reserve System under the BHCA. On October 20, 2000, Sky Financials election to be designated a financial holding company was approved by the Federal Reserve Board.



Subsidiary Bank. Sky Financials banking subsidiary is subject to
regulation and examination primarily by the Ohio Division of Financial Institutions and the Federal Reserve Board and secondarily by the Federal Deposit Insurance Corporation (FDIC).



Financial Services Subsidiaries. Many of Sky Financials financial services subsidiaries also are subject to
regulation by the Federal Reserve Board and other applicable federal and state agencies. Sky Financials insurance subsidiaries are subject to regulation by applicable state insurance regulatory agencies. Other non-bank subsidiaries of Sky
Financial are subject to the laws and regulations of both the federal government and the various states in which they conduct business. Sky Trust, Sky Financials trust services affiliate, is regulated by the Office of the Comptroller of the
Currency (OCC).



Securities and Exchange Commission (SEC)
and NASDAQ. Sky Financial is also under the jurisdiction of the SEC and certain state securities commissions for matters relating to the offering and sale of its securities. Sky Financial is subject to the disclosure and regulatory requirements
of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC. Sky Financial is listed on the NASDAQ Stock Market under the trading symbol SKYF, and is subject to the rules of
NASDAQ for listed companies.



Bank Holding Company Activities



Interstate Banking. Under the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (Riegle-Neal Act), as amended, a bank holding company may acquire banks in states other than its home state, subject to certain limitations. The Riegle-Neal Act also authorizes banks to merge across state
lines, thereby creating interstate branches. Banks are also permitted to acquire and to establish de novo branches in other states where authorized under the laws of those states.



Regulatory Approval. Under the BHCA, prior approval of the Federal Reserve Board is required for the acquisition of
more than 5% of the voting stock of any bank. In determining whether to approve a proposed bank acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to
be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institutions record of addressing the credit needs of the communities it serves, including the needs of low and moderate
income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act of 1977.



Dividend Restrictions



Sky Financial is a legal entity separate and distinct from its subsidiary bank and other subsidiaries. Its principal source of funds to pay dividends on its common and preferred stock and debt service on its debt is
dividends from its subsidiaries, primarily Sky Bank. Various federal and state statutory provisions and regulations limit the amount of dividends that Sky Bank may pay without regulatory approval. Dividends payable by a state chartered bank are
limited to the lesser of the banks undivided profits and the banks retained net income for the current year plus its retained net income for the preceding two years (less any required transfers to capital surplus) up to the date of any
dividend declaration in the current calendar year. As of December 31, 2004, $51,608 was available for distribution to Sky Financial as dividends without prior regulatory approval.



Federal bank regulatory agencies have the authority to prohibit Sky Bank from engaging in unsafe or unsound practices in
conducting its business. The payment of dividends, depending on the financial condition of the bank, could be deemed an unsafe or unsound practice. The ability of Sky Bank to pay dividends in the future is currently influenced, and could be further
influenced, by bank regulatory policies and capital guidelines.



Holding
Company Structure



Transfer of Funds from Banking Subsidiary. Sky
Financials banking subsidiary is subject to restrictions under federal law that limit the transfer of funds or other items of value from this subsidiary to Sky Financial and its non-banking subsidiaries, including affiliates, whether in the
form of loans and other extensions of credit, investments and asset purchases or as other transactions involving the transfer of value



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from a subsidiary to an affiliate or for the benefit of an affiliate. Unless an exemption applies, these transactions by
a banking subsidiary with a single affiliate are limited to 10% of the subsidiary banks capital and surplus and, with respect to all covered transactions with affiliates in the aggregate, to 20% of the subsidiary banks capital and
surplus. Moreover, loans and extensions of credit to affiliates generally are required to be secured in specified amounts. A banks transactions with its non-bank affiliates are also generally required to be on arms-length terms.



Source of Strength Doctrine. Under current Federal
Reserve Board policy, Sky Financial is expected to act as a source of financial and managerial strength to its subsidiary bank and, under appropriate circumstances, to commit resources to support such subsidiary bank. This support could be required
at times when Sky Financial might not have the resources to provide it.



Capital loans from Sky Financial to its subsidiary bank are subordinate in right of payment to deposits and certain other indebtedness of the subsidiary bank. In the event of Sky Financials bankruptcy, any commitment by Sky Financial
to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.



Depositor Preference. The Federal Deposit Insurance Act provides that, in the event of the liquidation or other
resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will
have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors,
including Sky Financial, with respect to any extensions of credit they have made to such insured depository institution.



Liability of Commonly Controlled Institutions. The deposits of Sky Bank are insured by the FDIC. FDIC-insured depository institutions can be held
liable for any loss incurred, or reasonably expected to be incurred, by the FDIC due to the default of an FDIC-insured depository institution controlled by the same bank holding company, or for any assistance provided by the FDIC to an FDIC-insured
depository institution controlled by the same bank holding company that is in danger of default. Default means generally the appointment of a conservator or receiver. In danger of default means generally the existence of
certain conditions indicating that a default is likely to occur in the absence of regulatory assistance.



Capital Requirements



Sky Financial is
subject to risk-based capital requirements and guidelines imposed by the Federal Reserve Board. These are substantially similar to the capital requirements and guidelines imposed by the OCC and the FDIC on the depository institutions under their
jurisdictions. For this purpose, a depository institutions or holding companys assets, and some of its specified off-balance sheet commitments and obligations, are assigned to various risk categories. A depository institutions or
holding companys capital, in turn, is classified in one of three tiers, depending on type:



Core (Tier 1) Capital



| |  | Common equity
|- |  | -------------



| |  | Retained earnings
|- |  | -----------------



| |  | Qualifying non-cumulative perpetual preferred stock
|- |  | ---------------------------------------------------



| |  | A limited amount of qualifying cumulative perpetual stock at the holding company level
|- |  | --------------------------------------------------------------------------------------



| |  | Minority interests in equity accounts of consolidated subsidiaries
|- |  | ------------------------------------------------------------------



| |  | Less goodwill, most intangible assets and certain other assets
|- |  | --------------------------------------------------------------



Supplementary (Tier 2) Capital



| |  | Perpetual preferred stock not meeting the Tier 1 definition
|- |  | -----------------------------------------------------------



| |  | Qualifying mandatory convertible securities
|- |  | -------------------------------------------



| |  | Qualifying subordinated debt
|- |  | ----------------------------



| |  | Allowances for loan and lease losses, subject to limitations
|- |  | ------------------------------------------------------------



| |  | Recourse obligation on sold loan portfolios
|- |  | -------------------------------------------



Market Risk (Tier 3) Capital



| |  | Qualifying unsecured subordinated debt
|- |  | --------------------------------------



Sky Financial, like other bank holding companies, currently is required to maintain Tier 1 capital and total capital (the sum of Tier 1, Tier
2 and Tier 3 capital) equal to at least 4% and 8%, respectively, of its total risk-weighted assets (including various off-balance-sheet items, such as standby letters of credit). For a holding company to be considered well capitalized
for regulatory purposes, its Tier 1 and total capital ratios must be 6% and 10% on a risk-adjusted basis, respectively. At December 31, 2004, Sky Financial met both requirements, with Tier 1 and total capital equal to 9.3% and 11.7% of its
respective total risk-weighted assets.



Federal Reserve Board,
FDIC and state rules require Sky Financial to incorporate market and interest rate risk components into its risk-based capital standards. Under these market risk requirements, capital is allocated to support the amount of market risk related to a
financial institutions ongoing trading activities.



The
Federal Reserve Board also requires bank holding companies to maintain a minimum leverage ratio (Tier 1 capital to adjusted total assets) of 3% if the holding company has the highest regulatory rating and meets other requirements, or of
3% plus an additional cushion of at least 100 to 200 basis points (one to two percentage points) if the holding company does not meet these requirements. Sky Financials leverage ratio at December 31, 2004 was 7.7%.



The Federal Reserve Board may set capital requirements higher than the
minimums described above for holding companies whose circumstances warrant it. For example, holding companies experiencing or anticipating significant growth may be expected to maintain capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. The Federal Reserve Board has also indicated that it will consider a tangible Tier 1 capital leverage ratio (deducting all intangibles) and other indications of capital strength
in evaluating proposals for expansion or new activities.



Sky
Bank is subject to similar risk-based and leverage capital requirements adopted by the Federal Reserve Board. Sky Financials management believes that Sky Bank meets all capital requirements to which it is subject.



Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the FDIC, and to restrictions on its business, which are described under the next paragraph.



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Federal Deposit Insurance Corporation Improvement Act of 1991. The Federal Deposit Insurance
Corporation Improvement Act of 1991 (the FDICIA), among other things, identifies five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. It requires U.S. federal bank regulatory agencies to implement systems for prompt corrective action for insured depository institutions that do not meet minimum capital requirements based on these categories.
The FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Unless a bank is well capitalized, it is subject to restrictions on
its ability to offer brokered deposits and on other aspects of its operations. The FDICIA generally prohibits a bank from paying any dividend or making any capital distribution or paying any management fee to its holding company if the bank would
thereafter be undercapitalized. An undercapitalized bank must develop a capital restoration plan, and its parent holding company must guarantee the banks compliance with the plan up to the lesser of 5% of the banks assets at the time it
became undercapitalized and the amount needed to comply with the plan.



As of December 31, 2004, Sky Financial believes that its bank subsidiary was well capitalized, based on the prompt corrective action ratios and guidelines described above. A banks capital category is determined solely for the purpose
of applying the prompt corrective action regulations, and the capital category may not constitute an accurate representation of the banks overall financial condition or prospects for other purposes.



Deposit Insurance Assessments



The FDIC insures the deposits of Sky Financials depository institution subsidiary up
to prescribed limits for each depositor. The amount of FDIC assessments paid by each Bank Insurance Fund (BIF) member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the
assessment rate is based on the institutions capitalization risk category and supervisory subgroup category. An institutions capitalization risk category is based on the FDICs determination of whether the institution is well
capitalized, adequately capitalized or less than adequately capitalized. An institutions supervisory subgroup category is based on the FDICs assessment of the financial condition of the institution and the probability that FDIC
intervention or other corrective action will be required.



The
FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. An increase in the assessment rate could have a material adverse effect on Sky Financials earnings, depending on the amount of the increase. The FDIC is
authorized to terminate a depository institutions deposit insurance upon a finding by the FDIC that the institutions financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has
violated any applicable rule, regulation, order or condition enacted or imposed by the institutions regulatory agency. The termination of deposit insurance for Sky Bank could have a material adverse effect on Sky Financials earnings.



Fiscal and Monetary Policies



Sky Financials business and earnings are affected significantly by the fiscal and
monetary policies of the federal government and its agencies. Sky Financial is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the United States. Among the instruments of monetary
policy available to the Federal Reserve are (a) conducting open market operations in United States government securities, (b) changing the discount rates of borrowings of depository institutions, (c) imposing or changing reserve requirements against
depository institutions deposits, and (d) imposing or changing reserve requirements against certain borrowing by banks and their affiliates. These methods are used in varying degrees and combinations to affect directly the availability of bank
loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve Board have a material effect on the earnings of Sky Financial.



Privacy Provisions of Gramm-Leach-Bliley Act



Under Gramm-Leach-Bliley Act (GLB Act) federal banking regulators adopted rules that limit
the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow
consumers to prevent disclosure of certain personal information to non-affiliated third parties. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial companies and conveyed to outside
vendors.



Sarbanes-Oxley Act of 2002



The Sarbanes-Oxley Act of 2002 contains important new requirements for public companies in
the area of financial disclosure and corporate governance. In accordance with section 302(a) of the Sarbanes-Oxley Act, written certifications by Sky Financials chief executive officer and chief financial officer are required. These
certifications attest that Sky Financials quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact. Sky Financial has also implemented a program designed to comply with Section 404 of the
Sarbanes-Oxley Act, which includes the identification of significant processes and accounts, documentation of the design of control effectiveness over process and entity level controls, and testing of the operating effectiveness of key controls.
Also, in response to the Sarbanes-Oxley Act, Sky Financial adopted a series of procedures to improve its corporate governance practices. One of these actions included the formation of a Financial Disclosure Committee whose members include the chief
executive officer, the chief financial officer and other Sky Financial officers. Sky Financial also requires signed certifications from managers who are responsible for internal controls throughout Sky Financial as to the integrity of the
information they prepare. These procedures supplement Sky Financials Code of Ethics policies and procedures that have previously been in place. See Item 9A  Controls and Procedures for Sky Financials evaluation of its
disclosure controls and procedures.



Future Legislation



Various legislation, including proposals to change substantially the financial institution
regulatory system and to expand or contract the powers of banking institutions and bank holding companies, is from time to time introduced in Congress. This legislation may change banking statutes and the operating environment of Sky Financial and
its subsidiaries in substantial and unpredictable ways. If enacted,





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such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect
the competitive balance among banks, savings associations, credit unions and other financial institutions. Sky Financial cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implemented
regulations, would have on the financial condition or results of operations of Sky Financial or any of its subsidiaries.



To the extent that the previous information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the full text
of those provisions. Also, such statutes, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to Sky
Financial could have a material effect on the business of Sky Financial.



In addition, see the information contained in Note 21 Regulatory Matters on page 56 of this Form 10-K.



Employees



As of December 31, 2004, Sky Financial and its subsidiaries had approximately 4,001 full-time equivalent employees. Sky Financial and its subsidiaries consider their employee relations to be good. None of the
employees are covered by a collective bargaining agreement.



Available
Information



Sky Financials Internet address is www.skyfi.com. We
have made available free of charge on or through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after such material was electronically filed with, or furnished to the SEC. Materials that Sky Financial files with the SEC may be read and copied at the SECs Public Reference Room at 450 Fifth
Street, NW, Washington, D.C. 20549. This information may also be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC at www.sec.gov. Sky Financial will provide a copy of any of the foregoing documents to stockholders upon request.



Certain Statistical Information Regarding Sky Financial



Certain financial and statistical information relative to Sky Financial as required under the SECs Industry Guide 3, Statistical Disclosure By Bank Holding
Companies, and related discussion is incorporated by specific references from the indicated pages of this Form 10-K.



|                                                                                                            |  |      
|----------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                            |  | Pages
|Financial Ratios                                                                                            |  | 10   
|Net Interest Income; Average Balance Sheets and Related Yields and Rates; Volume and Rate Variance Analysis |  | 13-15
|Loan Portfolio; Under-performing Assets; Risk Elements                                                      |  | 17-20
|Provision and Allowance for Credit Losses                                                                   |  | 20-21
|Securities                                                                                                  |  | 22-23
|Deposits                                                                                                    |  | 24   
|Short-Term Borrowings                                                                                       |  | 24   



Item 2. Properties



Sky Financials executive
offices are located in Bowling Green, Ohio. Sky Bank operates over 280 financial centers, of which substantially all are owned. Also, the information contained in Note 5 Premises and Equipment on page 43 of this Form 10-K is incorporated
herein by reference in response to this item.



Item 3. Legal Proceedings



Sky Financial and its
affiliates are, from time to time, involved in various lawsuits and claims, which arise in the normal course of business. Some of these proceedings seek relief or damages that are substantial, and in some instances are filed as class actions.
Nonetheless, based upon the advice of counsel, management is of the opinion that any liabilities that may result from these lawsuits and claims will not have a material adverse effect on the consolidated financial condition or results of operations
of Sky Financial.



In re Commercial Money Center, Inc. Equipment Lease
Litigation in the U. S. District Court for the Northern District of Ohio, Eastern Division, MDL Case No. 1:02-CV-16000



Between August 2000 and December 2001, Sky Bank provided financing to a commercial borrower and its affiliated entities for the purchase of three separate
portfolios of commercial lease pools, and a warehouse line of credit to finance lease pools. During 2001, Metropolitan Bank and Trust Company, which was merged with Sky Bank on May 16, 2003, and Second National Bank of Warren, which was merged with
Sky Bank on July 2, 2004, each provided similar financing to the same commercial borrower and its affiliated entities. These loans, with a December 31, 2004 outstanding balance of $34.4 million, are secured by assignments of the payment streams from
the underlying leases, surety bonds or insurance policies, and a limited guarantee from the sole member of the commercial borrower.



Upon default of these commercial loans, Sky Bank (and its predecessors Metropolitan and Second National) made demand for payment from Illinois Union
Insurance Company (IU), RLI Insurance Company (RLI), and Royal Indemnity Company (Royal) under the relevant surety bonds and insurance policies. IU, RLI and Royal (collectively, the Sureties) have
failed to make the payments required under the surety bonds and insurance policies. As a result, in the spring of 2002, Sky filed suit against each of the Sureties seeking to enforce Sky Banks rights under the surety bonds and insurance
policies issued by the Sureties in connection with the commercial lease pools. Skys complaints claim breach of contract, bad faith and allege that the Sureties are liable for the payments due to Sky under the terms of the bonds and are
estopped from asserting fraud as a defense to paying any claims under the bonds. Similar suits were filed by Metropolitan in June 2002 and by Second National in April and June, 2002. In October 2002, the suits were consolidated for pretrial purposes
with more than 35 other lawsuits involving similar claims in the United States District Court for the Northern District of Ohio, Eastern Division, under the Federal Multi-district Litigation (MDL) Rules.



7



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##### Table of Contents

On January 31, 2003, Sky Bank and the other Claimants in the MDL Proceeding (MDL 02CV16000, Docket No.
1490) filed a consolidated Motion for Judgment on the Pleadings (the Motion) seeking a determination that the Sureties are liable, as a matter of law, under the relevant surety bonds and insurance policies. The Motion is pending with the
MDL Court and discovery in the MDL Proceeding is continuing. Amendments to the pleadings are currently due 14 days after the Court rules on the Motions. Sky Bank is prepared to amend its complaint to include additional claims against the Sureties.



The key defense of the Sureties in denying Sky Banks
claims under the surety bonds is that they were fraudulently induced by the originator of the commercial leases to issue the surety bonds in the first instance. The Sureties have also asserted related defenses that the underlying equipment leases
are invalid, usurious or otherwise unenforceable. Sky Bank believes that none of these defenses can defeat Sky Banks claims under the surety bonds, which, in the view of Sky Bank, provide for absolute and unconditional guarantees of payment.



Sky Bank believes that the language of the surety bonds (and
in the case of IU, the insurance policies) clearly provides that the Sureties are responsible to Sky Bank, as the Obligee or Named Insured under the bonds, for the underwriting of the lessees and leases, including all issues of fraud, and that the
Sureties waived any defense of fraud to claims under the bonds. Sky Bank also believes that the surety bonds make it clear that the Sureties were responsible for the performance of the originator of the leases as sub-servicer of the leases. Finally,
Sky Bank believes that the surety bonds provide that if the Obligee or Named Insured fails to receive a payment due under a lease from the sub-servicer, a default under the lease occurs and the Sureties payment obligations are triggered.
Relevant excerpts from the RLI and Royal surety bonds are set forth below:



The Surety is responsible to the Obligee for the individual underwriting of each lessee and Lease, including but not limited to, all related credit matters, issues of fraud, bankruptcy and the accurate and timely
performance by any sub-servicer designated by Surety, and Surety shall assert no defenses to any claim under this Bond as a result of any of the foregoing. This Lease Bond and the Suretys obligation constitute an unconditional and absolute
guarantee of payment, not collection. If the Obligee fails to receive a payment under the Lease from the Surety, as servicer, or from any sub-servicer, on the scheduled due date, a default under the Lease occurs. Upon such default, the Surety shall
have thirty (30) days to cause the default to be remedied. The Surety shall make payment on this bond to the Obligee upon receipt of demand from the Obligee, within this 30 day period.



Relevant excerpts from the IU insurance policies are set forth below:



The issuance of this endorsement shall represent the Companys approval of the individual underwriting and execution
and delivery of each Lease, including, but not limited to, all related credit matters, issues of fraud, bankruptcy, validity, legality and enforceability and the Company shall pay all claims hereunder unconditionally and assert no defenses to any
claim under this endorsement as a result of any of the foregoing or based on any act or omission of the master-servicer or sub-servicer. If the named insured fails to receive a payment under the lease from the lesseethen default under the
lease occurs. Upon such default, the Company shall have thirty (30) days to cause the default to be remedied. Upon the passage of such 30-day period, then the Company shall make payment hereunder to the named insured in immediately available funds.



Furthermore, Sky Bank believes that as a further inducement to
Sky Bank to extend credit, the Sureties issued representation letters and legal opinions, which confirmed the validity and enforceability of its surety bonds, and in effect acknowledged the assignment of the bonds to Sky Bank.



Sky Financial has reviewed the relevant matters of fact and law with its
special counsel and believes that it has substantial and meritorious claims against the Sureties, due in part to the fact that, under the terms of the bonds, the Sureties undertake the responsibility for all credit matters and any fraud that may
have occurred in the underwriting of the credit, and waive all defenses associated with the bonds, including defenses of fraud. Sky Financial has and will continue to vigorously assert all the rights and remedies available to it to obtain payment
under the bonds. While the ultimate outcome of this matter cannot be determined at this time, Sky Financial management does not believe that the outcome of any of these pending legal proceedings will materially affect the consolidated financial
position or results of operations of Sky Financial.



Scott M. Lukouski, et.
al. vs. National Marine, Inc., Sky Financial Group, Inc., et. al., Case No. 2004 CV 685

(Court of Common Pleas, Erie County, Ohio)



In October, 2004, Sky Financial was one of the named defendant lenders in a
purported class action complaint seeking remedies related to the financing of watercraft by Second National Bank of Warren, a predecessor of Sky Bank. In the acquisition, Sky Financial assumed a portfolio of indirect boat loans originated through
National Marine, Inc. The complaint alleges that defendants engaged in fraudulent activities in connection with the purchase, sale and financing of watercraft, and that defendant lenders failed to follow prudent banking practices in the purchase of
commercial paper from National Marine. The complaint seeks injunctive and equitable relief, compensatory and punitive damages, and other remedies on behalf of a class of borrowers. Sky Financial intends to vigorously defend against these claims, and
believes that it has meritorious claims under certain insurance policies relating thereto. Sky Financial does not believe that the outcome of this proceeding is likely to have a materially adverse effect on the consolidated financial position or
results of operations of Sky Financial.



In November, 2004, Sky
Financial filed a declaratory judgment action in Trumbull County (Case No.: 2004 CV 2779) and asserted jurisdiction of the class action in Trumbull County Common Pleas Court, which has jurisdiction over the Receiver and assets of National Marine. On
January 4, 2005, an order was signed by the Erie County Court transferring venue to Trumbull County Common Pleas Court.



Item 4. Submission of Matters to a Vote of Security Holders



None



8



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##### Table of Contents

PART II



Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



The information contained in Note 2 on page 39 and Note 18 Stock Options on page 53 of this Form 10-K is incorporated herein by reference in response to this
item. The company did not buy back any shares in the fourth quarter of 2004. The company has an authorization to purchase 2,000,000 shares under which none has been repurchased as of December 31, 2004.



Quarterly Common Stock Prices, Dividends and Yields



|                                       |  |        |  |        |  |                     |  |                  |  |                 |  
|-------------------------------------- |  | ------ |  | ------ |  | ------------------- |  | ---------------- |  | --------------- | -
|                                       |  | High   |  | Low    |  | Book Value perShare |  | DividendperShare |  | Dividend Yield* |  
|2004                                   |  |        |  |        |  |                     |  |                  |  |                 |  
|Fourth quarter                         |  | $29.25 |  | $24.90 |  | $13.77              |  | $0.22            |  | 3.21            | %
|Third quarter                          |  | 25.55  |  | 23.13  |  | 13.44               |  | 0.21             |  | 3.43            |  
|Second quarter                         |  | 26.23  |  | 23.00  |  | 11.13               |  | 0.21             |  | 3.40            |  
|First quarter                          |  | 27.81  |  | 24.35  |  | 11.46               |  | 0.21             |  | 3.16            |  
|                                       |  |        |  |        |  |                     |  |                  |  |                 |  
|2003                                   |  |        |  |        |  |                     |  |                  |  |                 |  
|Fourth quarter                         |  | $26.10 |  | $22.51 |  | $10.80              |  | $0.21            |  | 3.40            | %
|Third quarter                          |  | 23.93  |  | 21.30  |  | 10.31               |  | 0.20             |  | 3.50            |  
|Second quarter                         |  | 22.00  |  | 18.63  |  | 10.16               |  | 0.20             |  | 3.89            |  
|First quarter                          |  | 21.00  |  | 18.75  |  | 9.67                |  | 0.20             |  | 3.99            |  
|                                       |  |        |  |        |  |                     |  |                  |  |                 |  
|                                       |  |        |  |        | 
|Stock Information at December 31, 2004 |  |        |  |        |  |                     |  |                  |  |                 |  
|                                       |  |        |  |        | 
|                                       |  |        |  |        |  |                     |  |                  |  | CommonStock     |  
|Shares authorized                      |  |        |  |        |  |                     |  |                  |  | 350,000,000     |  
|Shares issued                          |  |        |  |        |  |                     |  |                  |  | 106,951,806     |  
|Treasury shares                        |  |        |  |        |  |                     |  |                  |  | 113,295         |  
|Number of shareholders of record       |  |        |  |        |  |                     |  |                  |  | 20,064          |  
|Closing market price per share         |  |        |  |        |  |                     |  |                  |  | $28.67          |  
|Book value per share                   |  |        |  |        |  |                     |  |                  |  | $13.77          |  
|Stock exchange                         |  |        |  |        |  |                     |  |                  |  | NASDAQ          |  
|Stock symbol                           |  |        |  |        |  |                     |  |                  |  | SKYF            |  

---

|* | Calculated on average traded price for the quarter.
|- | ---------------------------------------------------



9



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##### Table of Contents

Item 6. Selected Financial Data

(Dollars and shares in thousands, except per share data)



|                                                          |  |      |            |   |      |   |            |      |  |   |            |   |  |      |           |   |  |   |           |  
|--------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | --------- | - |  | - | --------- | -
|December 31,                                              |  | 2004 |            |   | 2003 |   |            | 2002 |  |   | 2001       |   |  | 2000 |          
|Consolidated Statements of Income                         |  |      |            |   |      |   |            |      |  |   |            |   |  |      |           |   |  |   |           |  
|Interest income                                           |  | $    | 661,943    |   |      | $ | 594,063    |      |  | $ | 576,397    |   |  | $    | 619,873   |   |  | $ | 624,924   |  
|Interest expense                                          |  |      | 210,632    |   |      |   | 202,820    |      |  |   | 235,162    |   |  |      | 302,988   |   |  |   | 322,219   |  
|Net interest income                                       |  |      | 451,311    |   |      |   | 391,243    |      |  |   | 341,235    |   |  |      | 316,885   |   |  |   | 302,705   |  
|Provision for credit losses                               |  |      | 37,660     |   |      |   | 34,125     |      |  |   | 37,659     |   |  |      | 27,384    |   |  |   | 17,794    |  
|Net interest income after provision for credit losses     |  |      | 413,651    |   |      |   | 357,118    |      |  |   | 303,576    |   |  |      | 289,501   |   |  |   | 284,911   |  
|Non-interest income                                       |  |      | 203,417    |   |      |   | 178,898    |      |  |   | 147,984    |   |  |      | 124,388   |   |  |   | 112,841   |  
|Non-interest expenses                                     |  |      | 356,524    |   |      |   | 307,186    |      |  |   | 253,700    |   |  |      | 221,523   |   |  |   | 219,462   |  
|Income from continuing operations before income taxes     |  |      | 260,544    |   |      |   | 228,830    |      |  |   | 197,860    |   |  |      | 192,366   |   |  |   | 178,290   |  
|Income taxes                                              |  |      | 85,344     |   |      |   | 76,150     |      |  |   | 65,712     |   |  |      | 63,714    |   |  |   | 57,357    |  
|Income from continuing operations                         |  |      | 175,200    |   |      |   | 152,680    |      |  |   | 132,148    |   |  |      | 128,652   |   |  |   | 120,933   |  
|Income (loss) from discontinued operations (net of tax)   |  |      | 19,155     |   |      |   | 3,937      |      |  |   | (4,341     | ) |  |      | (7,989    | ) |  |   | (6,560    | )
|Net income                                                |  |      | 194,355    |   |      |   | 156,617    |      |  |   | 127,807    |   |  |      | 120,663   |   |  |   | 114,373   |  
|Net income available to common shareholders               |  |      | 194,355    |   |      |   | 156,617    |      |  |   | 127,807    |   |  |      | 120,663   |   |  |   | 114,373   |  
|                                                          |  |      |            |   |     
|Per Common Share                                          |  |      |            |   |      |   |            |      |  |   |            |   |  |      |           |   |  |   |           |  
|Basic income from continuing operations                   |  | $    | 1.76       |   |      | $ | 1.70       |      |  | $ | 1.58       |   |  | $    | 1.56      |   |  | $ | 1.43      |  
|Basic income (loss) from discontinued operations          |  |      | 0.19       |   |      |   | 0.05       |      |  |   | (0.05      | ) |  |      | (0.10     | ) |  |   | (0.08     | )
|Basic net income                                          |  |      | 1.95       |   |      |   | 1.75       |      |  |   | 1.53       |   |  |      | 1.46      |   |  |   | 1.35      |  
|Diluted income from continuing operations                 |  |      | 1.74       |   |      |   | 1.69       |      |  |   | 1.57       |   |  |      | 1.55      |   |  |   | 1.42      |  
|Diluted income (loss) from discontinued operations        |  |      | 0.19       |   |      |   | 0.04       |      |  |   | (0.05      | ) |  |      | (0.10     | ) |  |   | (0.08     | )
|Diluted net income                                        |  |      | 1.93       |   |      |   | 1.73       |      |  |   | 1.52       |   |  |      | 1.45      |   |  |   | 1.35      |  
|Cash dividends declared                                   |  |      | 0.85       |   |      |   | 0.81       |      |  |   | 0.77       |   |  |      | 0.74      |   |  |   | 0.72      |  
|Book value at year end                                    |  |      | 13.77      |   |      |   | 10.80      |      |  |   | 9.54       |   |  |      | 7.92      |   |  |   | 7.31      |  
|Weighted average shares outstanding  basic               |  |      | 99,461     |   |      |   | 89,630     |      |  |   | 83,439     |   |  |      | 82,449    |   |  |   | 84,604    |  
|Weighted average shares outstanding  diluted             |  |      | 100,568    |   |      |   | 90,404     |      |  |   | 84,096     |   |  |      | 83,028    |   |  |   | 84,967    |  
|                                                          |  |      |            |   |     
|Consolidated Balance Sheets (Year End)                    |  |      |            |   |      |   |            |      |  |   |            |   |  |      |           |   |  |   |           |  
|Total assets                                              |  | $    | 14,944,423 |   |      | $ | 12,946,978 |      |  | $ | 11,050,120 |   |  | $    | 9,252,228 |   |  | $ | 8,409,332 |  
|Securities available for sale                             |  |      | 3,091,813  |   |      |   | 2,511,369  |      |  |   | 2,247,181  |   |  |      | 1,996,843 |   |  |   | 1,846,517 |  
|Loans held for sale                                       |  |      | 9,433      |   |      |   | 28,062     |      |  |   | 77,458     |   |  |      | 85,740    |   |  |   | 13,854    |  
|Loans                                                     |  |      | 10,616,118 |   |      |   | 8,644,645  |      |  |   | 7,347,988  |   |  |      | 6,182,998 |   |  |   | 5,910,407 |  
|Allowance for credit losses                               |  |      | (151,389   | ) |      |   | (124,943   | )    |  |   | (106,675   | ) |  |      | (92,831   | ) |  |   | (92,089   | )
|Deposits                                                  |  |      | 10,351,591 |   |      |   | 8,515,533  |      |  |   | 7,617,472  |   |  |      | 6,545,177 |   |  |   | 5,894,462 |  
|Debt and FHLB advances                                    |  |      | 1,924,840  |   |      |   | 1,476,564  |      |  |   | 1,065,254  |   |  |      | 894,103   |   |  |   | 1,040,955 |  
|Total shareholders equity                                |  |      | 1,470,955  |   |      |   | 998,576    |      |  |   | 832,433    |   |  |      | 648,444   |   |  |   | 609,690   |  
|                                                          |  |      |            |   |     
|Selected Financial Ratios                                 |  |      |            |   |      |   |            |      |  |   |            |   |  |      |           |   |  |   |           |  
|Return on average assets                                  |  |      | 1.43       | % |      |   | 1.29       | %    |  |   | 1.29       | % |  |      | 1.39      | % |  |   | 1.41      | %
|Return on average shareholders equity                    |  |      | 15.75      |   |      |   | 17.23      |      |  |   | 17.67      |   |  |      | 19.11     |   |  |   | 19.78     |  
|Dividend payout ratio                                     |  |      | 43.64      |   |      |   | 46.59      |      |  |   | 50.43      |   |  |      | 50.61     |   |  |   | 53.66     |  
|Net interest margin, fully-taxable equivalent             |  |      | 3.69       |   |      |   | 3.70       |      |  |   | 3.90       |   |  |      | 3.96      |   |  |   | 4.08      |  
|Average loans to average deposits                         |  |      | 99.56      |   |      |   | 96.46      |      |  |   | 93.53      |   |  |      | 100.44    |   |  |   | 98.11     |  
|Average equity to average assets                          |  |      | 9.09       |   |      |   | 7.47       |      |  |   | 7.30       |   |  |      | 7.26      |   |  |   | 7.14      |  
|Allowance for credit losses to period-end loans           |  |      | 1.43       |   |      |   | 1.45       |      |  |   | 1.45       |   |  |      | 1.50      |   |  |   | 1.56      |  
|Allowance for credit losses to total non-performing loans |  |      | 105.32     |   |      |   | 151.30     |      |  |   | 154.07     |   |  |      | 272.20    |   |  |   | 429.12    |  
|Non-performing loans to period-end loans                  |  |      | 1.35       |   |      |   | 0.96       |      |  |   | 0.94       |   |  |      | 0.55      |   |  |   | 0.36      |  
|Net charge-offs to average loans                          |  |      | 0.37       |   |      |   | 0.40       |      |  |   | 0.47       |   |  |      | 0.40      |   |  |   | 0.22      |  



10



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##### Table of Contents

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation

(Dollars and shares in
thousands, except per share data)



The following discussion and analysis
represents a review of Sky Financial Group, Inc.s (Sky Financial) consolidated financial condition and results of operations. This review should be read in conjunction with the consolidated financial statements presented elsewhere in this
report.



Business Summary



Sky Financial Group is a diversified financial holding company with its headquarters located
in Bowling Green, Ohio. Sky Financial operates over 280 financial centers and over 300 ATMs serving communities in Ohio, Pennsylvania, Michigan, Indiana and West Virginia. Sky Financial Groups financial service affiliates include: Sky Bank,
commercial and retail banking; Sky Trust, asset management services; and Sky Insurance, retail and commercial insurance agency services.



Sky Financial has a specific strategic plan for delivering profitable growth. Sky Financials success is the result of five strategic priorities that
guide decisions and focus corporate resources. These are: 1) Organic Growth; 2) Fee Income; 3) Organizational Synergies; 4) Asset Quality; and 5) Acquisitions.



The primary source of Sky Financials revenue is net interest income from loans and deposits, and fee income. Balance sheet growth was again
strong in 2004. This growth is a direct result of Sky Financials organic growth strategy and acquisitions. During 2004 there was a change in the interest rate environment that saw increases in market rates, which contributed to the lower
mortgage activity and a significant decrease in mortgage banking revenues.



Discontinued Operations



On March 31, 2004, Sky Financial
completed the sale of its dental financing affiliate, Sky Financial Solutions. Sky Financial Solutions has been reported as a discontinued operation and the consolidated financial statements for all periods presented have been reclassified to
reflect this presentation. Sky Financial Solutions results of operations included revenues of $39,356, $32,969 and $23,516 and pre-tax income (loss) of $29,503, $6,242 and $(6,686) for 2004, 2003 and 2002, respectively. Sky Financial
recognized a pre-tax gain on the sale of Sky Financial Solutions of $31,240 ($20,306 after-tax) during 2004.



Completed Acquisitions



On November 30,
2004, Sky Financial acquired Prospect Bancshares, Inc. and its wholly-owned subsidiary Prospect Bank, a $202 million savings bank headquartered in Worthington, Ohio, for 1,139 shares of Sky Financial common stock and $17.6 million in cash.



On July 1, 2004, Sky Financial acquired Second Bancorp
Incorporated, a $2.0 billion bank holding company, and its wholly-owned subsidiaries including The Second National Bank of Warren and the Stouffer-Herzog Insurance Agency, Inc., for 11,953 shares of Sky Financial common stock. Second National Bank
was a commercial bank headquartered in Warren, Ohio and Stouffer-Herzog, a full-service insurance agency, was headquartered in Ashtabula, Ohio.



On April 1, 2004, Sky Financial acquired EOB, Inc. for 177 shares of Sky Financial common stock and $.5 million in cash. Headquartered in Canton, Ohio,
this insurance company specialized in the sales and service of group benefits.



On January 5, 2004, Sky Financial acquired Spencer-Patterson Insurance Agency, Inc. a professional liability, personal and commercial insurance agency headquartered in Findlay, Ohio, for 297 shares of Sky Financial
common stock and $793 in cash.



On October 19, 2003, Sky
Financial acquired GLB Bancorp, Inc. (GLB), a $225 million bank holding company, and its wholly-owned subsidiary Great Lakes Bank, a state member bank headquartered in Mentor, Ohio, for an aggregate purchase price of $43,263 payable in Sky Financial
common stock in a tax free exchange. GLB shareholders received 1,717 shares of Sky Financial common stock.



On July 8, 2003, Sky Financial acquired Insurance Buyers Service Agency, Inc., (IBS) a professional liability, personal and commercial insurance
agency headquartered in Boardman, Ohio, for 164 shares of Sky Financial common stock. Insurance Buyers Service Agency, Inc. was subsequently merged into Sky Insurance.



On April 30, 2003, Sky Financial acquired the outstanding capital stock of Metropolitan Financial Corp (Metropolitan), a
$1.5 billion savings and loan holding company headquartered in Highland Hills, Ohio, and its wholly-owned subsidiary, Metropolitan Bank and Trust Company for a purchase price of $81,294, including direct acquisition costs of $673. Metropolitan
shareholders received 2,887 shares of Sky Financial common stock and $25,327 in cash.



On October 1, 2002, Sky Financial acquired Three Rivers Bancorp (Three Rivers), a $1 billion bank holding company headquartered in Monroeville, Pennsylvania, and its wholly-owned subsidiary, Three Rivers Bank and
Trust Company, by acquiring all of the outstanding capital stock of Three Rivers for a total purchase price of $136,626. The purchase price consisted of 4,854 shares of Sky Financial common stock and cash of $41,799.



In April 2002, Sky Financial acquired Value Added Benefits, Ltd., a wholesale
insurance agency headquartered in Cleveland, Ohio, for $1,900 in cash.



In January 2002, Sky Financial completed the acquisition of Celaris Group, Inc., a full service insurance agency headquartered in Bowling Green, Ohio. In connection with the acquisition, Sky Financial paid $1,000 in cash and issued 748
shares of Sky Financial common stock. During the third quarter of 2002, Value Added Benefits, Ltd. was merged into Celaris Group, Inc. In December 2002, Celaris Group, Inc. merged with Picton Cavanaugh, Inc. to form Sky Insurance, Inc.



All of these acquisitions were accounted for under the purchase method of
accounting and their results of operation have been included in Sky Financials results of operation from the dates of the acquisition.



Overview



Sky Financials results from continuing operations for the years 2004 and 2003 reflected continued earnings improvement and significant expansion from the combination of acquisitions and organic growth, despite
the challenges from a slow economy and competitive industry. Growth in loans and deposits, development of fee-based revenues, discipline in expense controls and strong credit quality all contributed to the earnings improvement. In 2004, earnings
growth overcame a significant reduction in mortgage banking revenues from 2003, when lower market interest rates led to record levels in mortgage loan originations and gains on the sales of mortgage loans.



In 2004, net income for Sky Financial was $194,355, or $1.93 per diluted
share, up from $156,617, or $1.73 per diluted share in 2003, which was up from $127,807, or $1.52 per diluted share in 2002. 2004 net income was increased by the after-tax net income from discontinued operations of $19,155, or $.19 per diluted
share. 2003 net income included an after-tax net income from discontinued operations of $3,937, or $.04 per diluted share, while 2002 net income included an after-tax net loss from discontinued operations of $4,341, or $.05 per diluted share. In
2004, Sky Financial completed the sale of



11



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##### Table of Contents

Managements Discussion and Analysis of Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



its dental finance business for an after tax gain of $20,306, or $.20 per diluted share, which strengthened its liquidity and capital positions and provided greater focus
on its core regional financial services businesses. The dental financing business had grown significantly and, in 2003, had returned to profitability after operating at a loss since its restructure in 2000.



Income from continuing operations for 2004 was $175,200 or $1.74 per diluted
share, up from $152,680 or $1.69 per diluted share in 2003, which was up from $132,148 or $1.57 per diluted share in 2002. Sky Financials results include the impacts of mergers and acquisitions, which added assets of $2.2 billion in 2004, $1.7
billion in 2003 and $1.1 billion in 2002, as detailed in Note 2 of the financial statements. In addition, completing the acquisitions and divestitures as well as other organizational changes resulted in merger, integration and restructuring charges
of $4,542 in 2004, $4,577 in 2003 and $10,437 in 2002, as detailed in Note 16 of the financial statements.



In 2004, net interest income increased $60,068 due to the growth in assets, while the net interest margin remained basically stable throughout the year,
as benefits from rising short-term rates were offset by the flattening of the yield curve and the incremental effect of acquisitions. With the expansion from acquisitions, growth of fee-based businesses and greater gains on the sales of securities
in 2004, non-interest income rose $24,519, despite a reduction in mortgage banking revenues of $22,988, as mortgage loan originations of $1.3 billion in 2004 decreased from record levels of $2.3 billion in 2003. The provision for credit losses
increased $3,535 primarily due to growth as net credit losses as a percent of average loans improved to .37% in 2004 from .40% in 2003. Non-interest expenses increased in 2004 by $49,338 mainly due to acquisitions.



In 2003, net interest income increased $50,008 due to the growth in assets,
while the net interest margin tightened from lower market rates and the incremental effect of the acquisitions. Non-interest income grew $30,914, which in addition to the benefit from acquisitions, notably included a rise in mortgage banking income
of $19,206 and a record level of mortgage loan originations. The provision for credit losses declined $3,534 consistent with the reduction of net credit losses as a percent of average loans, while non-interest expenses increased in 2003 by $53,486,
mainly due to the acquisitions.



Business Line Results



Sky Financials continuing operations is managed along two primary business lines:
community banking and financial service affiliates. The community banking group is comprised of Sky Financials commercial bank, Sky Bank, which services businesses and consumers through a regional structure. As previously discussed, Sky
Financial acquired Second Bancorp and Prospect in 2004, Metropolitan and GLB during 2003 and Three Rivers during 2002. Substantially all of the assets of these acquisitions became part of the community banking segment.



The financial service affiliates include Sky Financials current
businesses relating to trust and investment management, insurance agency operations and other financial related services.



During 2004, Sky Financial acquired Spencer-Patterson, an agency that sells professional liability, personal and commercial insurance, and EOB, Inc., a
group benefit insurance agency. During 2003, Sky Financial acquired IBS, an agency that sells professional liability, personal and commercial insurance, and in 2002, Sky Financial acquired two insurance agencies, Celaris Group, Inc. and Value Added
Benefits, Ltd.



Additional information regarding Sky
Financials business lines and the financial measurement methodologies is provided in Note 22 of the consolidated financial statements. Table 1 summarizes Sky Financials business line results for each of the last three years.



Table 1Business Line Results



|                             |  |                   |         |      |   |         |      |  |   |         |  
|---------------------------- |  | ----------------- | ------- | ---- | - | ------- | ---- |  | - | ------- | -
|                             |  | Net Income (Loss) |        
|Year ended December 31,      |  | 2004              |         | 2003 |   |         | 2002 | 
|Community banking            |  | $                 | 164,266 |      | $ | 154,290 |      |  | $ | 132,176 |  
|                             |  |                   |        
|Financial service affiliates |  |                   | 9,774   |      |   | 5,283   |      |  |   | 4,883   |  
|Parent and other             |  |                   | 1,160   |      |   | (6,893  | )    |  |   | (4,911  | )
|                             |  |                   |         |      |   |         |      |  |   |         |  
|Continuing operations        |  | $                 | 175,200 |      | $ | 152,680 |      |  | $ | 132,148 |  
|                             |  |                   |         |      |   |         |      |  |   |         |  



Community banking net
income in 2004 reflected the benefit of the Second Bancorp and Prospect acquisitions, as well as the full year of acquisitions completed in 2003. Additionally, higher revenues from solid organic growth in loans and targeted deposit products help to
mitigate reduced mortgage banking revenues, as well as higher expenses and provisions for credit losses, both increasing with the strong growth.



In 2003, community banking net income reflected the benefit of acquisitions in addition to higher revenues from solid organic growth in loans and targeted
deposit products and record mortgage banking levels. Expenses also increased to support the higher revenues, and provisions for credit losses decreased as a result of improved asset quality and less growth in the loan portfolio.



The community banking results continued to reflect solid performance ratios,
although impacted by the recent acquisitions and lower mortgage banking revenues. For 2004, community banking generated a return on assets of 1.25% and efficiency ratio of 50.48% compared to 1.36% and 48.79%, respectively, in 2003 and 1.43% and
46.43%, respectively, in 2002. The efficiency ratio is defined as non-interest expense divided by the sum of fully taxable equivalent net interest income plus non-interest income.



The financial service affiliates improved earnings by 85% in 2004 after increasing 8% in 2003. The 2004 increase was mainly
due to the robust growth in both the insurance agency and wealth management businesses, in addition to eliminating the impact of an under-performing company. The significant growth resulted from the combination of acquisitions and organic growth.



Parent and other includes the net funding costs of the parent
company and all significant shared items of income and expense, including all merger, integration and restructuring charges and net securities gains and losses from the parents investment portfolio. In 2004, gains on the sale of securities, in
addition to reduced non-interest expenses, more than offset the impact of rising rates, increasing the net funding costs of the parent.





12



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##### Table of Contents

Net Interest Income



Net interest income, the
difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the most significant component of Sky Financials earnings. Net interest income is affected by changes in the
volumes, rates and composition of interest-earning assets and interest-bearing liabilities.



Table 2 summarizes net interest income and net interest margin for each of the three years ended December 31, 2004, 2003 and 2002.



Table 2Net Interest Income



|                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|Year ended December 31,                               |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Net interest income                                   |  | $    | 451,311 |   |      | $ | 391,243 |      |  | $ | 341,235 |  
|Taxable equivalent adjustments to net interest income |  |      | 3,372   |   |      |   | 3,118   |      |  |   | 3,166   |  
|Net interest income, fully taxable equivalent         |  | $    | 454,683 |   |      | $ | 394,361 |      |  | $ | 344,401 |  
|                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Net interest margin                                   |  |      | 3.66    | % |      |   | 3.67    | %    |  |   | 3.86    | %
|Taxable equivalent adjustment                         |  |      | .03     |   |      |   | .03     |      |  |   | .04     |  
|                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Net interest margin, fully taxable equivalent         |  |      | 3.69    | % |      |   | 3.70    | %    |  |   | 3.90    | %
|                                                      |  |      |         |   |      |   |         |      |  |   |         |  



Sky Financials net interest
income, on a fully tax-equivalent basis, of $454,683 in 2004 increased from $394,361 in 2003, which was up from $344,401 in 2002. The growth in net interest income was mainly due to the increase in average earning assets up 15.7% in 2004 after
growing 20.6% in 2003, while the net interest margin remained stable in 2004, down only one basis point, after declining 20 basis points in 2003 from 2002.



The increase in average earning assets in both 2004 and 2003 was mostly in loans and reflected solid organic growth in addition to the earning assets
acquired through mergers. In 2004 and 2003, loans, Sky Financials highest yielding assets, comprised 77% of average assets, up from 75% in 2002. In funding asset growth Sky Financial has successfully emphasized growth in non-interest-bearing
sources. As a percent of earning assets, interest-bearing liabilities declined to 86% in 2004 from 88% in 2003 and 2002.



The net interest margin, on a fully tax-equivalent basis was 3.69% in 2004 fairly stable compared to 3.70% in 2003, which was down from 3.90% in 2002.
While short-term rates rose in the second half of 2004, overall, the yield curve flattened. This combination, along with the lower incremental net interest margin from acquisitions, had the effect of basically neutralizing the potential benefit to
the margin from the rising rates. The decline in net interest margin in 2003 from 2002 resulted from the impact of acquisitions and the decrease in interest rates.



In 2005, Sky Financial expects to continue improving both its earning asset and funding mix through targeted organic growth
strategies, which should contribute to Sky Financials continued growth in net interest income.



Table 3 reflects the components of Sky Financials net interest income for each of the three years ended December 31, 2004, setting forth: (i)
average assets, liabilities and shareholders equity, (ii) interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, (iii) average yields earned on interest-earning assets and average rates
incurred on interest-bearing liabilities, (iv) the net interest rate spread (i.e., the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities), and (v) the net interest margin (i.e., net
interest income divided by average interest-earning assets). Rates are computed on a tax-equivalent basis. Non-accrual loans have been included in the average loan balances.



13



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##### Table of Contents

Managements Discussion and Analysis of Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



Table 3Three-Year Average Balance Sheet and Net Interest Margin



|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|--------------------------------------------------------------- |  | -------------- | ---------- | -------- | ---- | ------- |  | ---- | -------------- |  | -------- | ---------- | ---- | - | ------- | -------------- | ---- | -------- |  | ---- | --------- |  | - | ------- |  | ---- | -
|                                                                |  | 2004           |            |          | 2003 |         |  | 2002 |               
|Year ended December 31,                                         |  | AverageBalance |            | Interest |      | Rate    |  |      | AverageBalance |  | Interest |            | Rate |   |         | AverageBalance |      | Interest |  | Rate |          
|Interest-earning assets                                         |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Interest-earning deposits                                       |  | $              | 37,187     |          | $    | 472     |  | 1.27 | %              |  | $        | 33,534     |      | $ | 293     |                | 0.87 | %        |  | $    | 10,832    |  | $ | 196     |  | 1.81 | %
|Federal funds sold and other                                    |  |                | 2,573      |          |      | 30      |  | 1.17 |                |  |          | 3,200      |      |   | 72      |                | 2.25 |          |  |      | 11,180    |  |   | 166     |  | 1.48 |  
|Securities                                                      |  |                | 2,795,189  |          |      | 121,728 |  | 4.35 |                |  |          | 2,440,986  |      |   | 103,769 |                | 4.25 |          |  |      | 2,197,795 |  |   | 119,675 |  | 5.45 |  
|Loans and loans held for sale                                   |  |                | 9,493,005  |          |      | 543,085 |  | 5.72 |                |  |          | 8,175,286  |      |   | 493,047 |                | 6.03 |          |  |      | 6,616,035 |  |   | 459,526 |  | 6.95 |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Total interest-earning assets                                   |  |                | 12,327,954 |          |      | 665,315 |  | 5.40 |                |  |          | 10,653,006 |      |   | 597,181 |                | 5.61 |          |  |      | 8,835,842 |  |   | 579,563 |  | 6.56 |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Assets of discontinued operations                               |  |                | 215,013    |          |      |         |  |      |                |  |          | 737,476    |      |   |         |                |      |          |  |      | 494,144   |  |   |         |  |      |  
|Non-earning assets                                              |  |                | 1,028,949  |          |      |         |  |      |                |  |          | 776,265    |      |   |         |                |      |          |  |      | 585,724   |  |   |         |  |      |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Total assets                                                    |  | $              | 13,571,916 |          |      |         |  |      |                |  | $        | 12,166,747 |      |   |         |                |      |          |  | $    | 9,915,710 |  |   |         |  |      |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Interest-bearing liabilities                                    |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Demand deposits                                                 |  | $              | 298,742    |          | $    | 2,350   |  | 0.79 | %              |  | $        | 220,891    |      | $ | 1,344   |                | 0.61 | %        |  | $    | 107,325   |  | $ | 802     |  | 0.75 | %
|Savings deposits                                                |  |                | 3,767,873  |          |      | 28,755  |  | 0.76 |                |  |          | 3,343,474  |      |   | 30,383  |                | 0.91 |          |  |      | 2,660,130 |  |   | 35,755  |  | 1.34 |  
|Time deposits                                                   |  |                | 4,035,606  |          |      | 110,659 |  | 2.75 |                |  |          | 3,728,437  |      |   | 111,478 |                | 2.99 |          |  |      | 3,384,936 |  |   | 139,708 |  | 4.13 |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Total interest-bearing deposits                                 |  |                | 8,102,221  |          |      | 141,764 |  | 1.75 |                |  |          | 7,292,802  |      |   | 143,205 |                | 1.96 |          |  |      | 6,152,391 |  |   | 176,265 |  | 2.86 |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Short-term borrowings                                           |  |                | 897,438    |          |      | 18,685  |  | 2.08 |                |  |          | 849,464    |      |   | 18,472  |                | 2.17 |          |  |      | 732,230   |  |   | 19,438  |  | 2.65 |  
|Trust preferred securities/ junior subordinated debentures      |  |                | 174,385    |          |      | 8,695   |  | 4.99 |                |  |          | 150,001    |      |   | 7,528   |                | 5.02 |          |  |      | 110,687   |  |   | 7,750   |  | 7.00 |  
|Debt and FHLB advances                                          |  |                | 1,427,547  |          |      | 41,488  |  | 2.91 |                |  |          | 1,041,429  |      |   | 33,615  |                | 3.23 |          |  |      | 763,119   |  |   | 31,709  |  | 4.16 |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Total interest-bearing liabilities                              |  |                | 10,601,591 |          |      | 210,632 |  | 1.99 |                |  |          | 9,333,696  |      |   | 202,820 |                | 2.17 |          |  |      | 7,758,427 |  |   | 235,162 |  | 3.03 |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Liabilities of discontinued operations                          |  |                | 201,842    |          |      |         |  |      |                |  |          | 694,010    |      |   |         |                |      |          |  |      | 466,206   |  |   |         |  |      |  
|Non-interest-bearing liabilities                                |  |                | 1,538,550  |          |      |         |  |      |                |  |          | 1,230,285  |      |   |         |                |      |          |  |      | 967,835   |  |   |         |  |      |  
|Shareholders equity                                            |  |                | 1,229,933  |          |      |         |  |      |                |  |          | 908,756    |      |   |         |                |      |          |  |      | 723,242   |  |   |         |  |      |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Total liabilities and equity                                    |  | $              | 13,571,916 |          |      |         |  |      |                |  | $        | 12,166,747 |      |   |         |                |      |          |  | $    | 9,915,710 |  |   |         |  |      |  
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Net interest income, fully taxable equivalent                   |  |                |            |          | $    | 454,683 |  |      |                |  |          |            |      | $ | 394,361 |                |      |          |  |      |           |  | $ | 344,401 |  |      |  
|Net interest spread                                             |  |                |            |          |      |         |  | 3.41 | %              |  |          |            |      |   |         |                | 3.44 | %        |  |      |           |  |   |         |  | 3.53 | %
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  
|Net interest income, fully taxable equivalent to earning assets |  |                |            |          |      |         |  | 3.69 | %              |  |          |            |      |   |         |                | 3.70 | %        |  |      |           |  |   |         |  | 3.90 | %
|                                                                |  |                |            |          |      |         |  |      |                |  |          |            |      |   |         |                |      |          |  |      |           |  |   |         |  |      |  



- Loan fees are included in interest
income.



14



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##### Table of Contents

Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest
expense. Table 4 presents an analysis of increases and decreases in interest income and expense in terms of changes in volume and interest rates during the three years ended December 31, 2004. The table is presented on a tax-equivalent basis.



Table 4Net Interest Income - Rate/Volume Analysis



|                                                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|---------------------------------------------------------- |  | ----------------------------------------------------- | ------ | - | ----------------------------------------------------- | - | ------- | ----- |  | - | ------ | - |  | ---- | ------- | - | ----- | - | -------- | - |  | - | ------- | -
|                                                           |  | 2004                                                  |        |   | 2003                                                  |  
|                                                           |  | Change from 2003 in interest income or expense due to |        |   | Change from 2002 in interest income or expense due to |  
|Year ended December 31,                                    |  | Volume                                                |        |   | Rate                                                  |   |         | Total |  |   | Volume |   |  | Rate |         |   | Total |  
|Interest income attributable to:                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Interest-bearing deposits                                  |  | $                                                     | 32     |   |                                                       | $ | 147     |       |  | $ | 179    |   |  | $    | 410     |   |       | $ | (313     | ) |  | $ | 97      |  
|Federal funds sold                                         |  |                                                       | (14    | ) |                                                       |   | (28     | )     |  |   | (42    | ) |  |      | (119    | ) |       |   | 25       |   |  |   | (94     | )
|Securities                                                 |  |                                                       | 15,059 |   |                                                       |   | 2,900   |       |  |   | 17,959 |   |  |      | 13,242  |   |       |   | (29,148  | ) |  |   | (15,906 | )
|Loans, net                                                 |  |                                                       | 79,471 |   |                                                       |   | (29,433 | )     |  |   | 50,038 |   |  |      | 108,300 |   |       |   | (74,779  | ) |  |   | 33,521  |  
|                                                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Total interest income                                      |  |                                                       | 94,548 |   |                                                       |   | (26,414 | )     |  |   | 68,134 |   |  |      | 121,833 |   |       |   | (104,215 | ) |  |   | 17,618  |  
|                                                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Interest expense attributable to:                          |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Deposits:                                                  |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Interest-bearing demand                                    |  |                                                       | 474    |   |                                                       |   | 532     |       |  |   | 1,006  |   |  |      | 325     |   |       |   | 217      |   |  |   | 542     |  
|Savings                                                    |  |                                                       | 3,857  |   |                                                       |   | (5,485  | )     |  |   | (1,628 | ) |  |      | 8,822   |   |       |   | (14,194  | ) |  |   | (5,372  | )
|Time                                                       |  |                                                       | 9,184  |   |                                                       |   | (10,003 | )     |  |   | (819   | ) |  |      | 14,178  |   |       |   | (42,408  | ) |  |   | (28,230 | )
|                                                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Total deposits                                             |  |                                                       | 13,515 |   |                                                       |   | (14,956 | )     |  |   | (1,441 | ) |  |      | 23,325  |   |       |   | (56,385  | ) |  |   | (33,060 | )
|Short-term borrowings                                      |  |                                                       | 1,043  |   |                                                       |   | (830    | )     |  |   | 213    |   |  |      | 3,112   |   |       |   | (4,078   | ) |  |   | (966    | )
|Trust preferred securities/ junior subordinated debentures |  |                                                       | 1,223  |   |                                                       |   | (56     | )     |  |   | 1,167  |   |  |      | 2,753   |   |       |   | (2,975   | ) |  |   | (222    | )
|Debt and FHLB advances                                     |  |                                                       | 12,462 |   |                                                       |   | (4,589  | )     |  |   | 7,873  |   |  |      | 11,564  |   |       |   | (9,658   | ) |  |   | 1,906   |  
|                                                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Total interest expense                                     |  |                                                       | 28,243 |   |                                                       |   | (20,431 | )     |  |   | 7,812  |   |  |      | 40,754  |   |       |   | (73,096  | ) |  |   | (32,342 | )
|                                                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  
|Net interest income                                        |  | $                                                     | 66,305 |   |                                                       | $ | (5,983  | )     |  | $ | 60,322 |   |  | $    | 81,079  |   |       | $ | (31,119  | ) |  | $ | 49,960  |  
|                                                           |  |                                                       |        |   |                                                       |   |         |       |  |   |        |   |  |      |         |   |       |   |          |   |  |   |         |  



Non-Interest Income



Total non-interest income in 2004 increased $24,519 from 2003, which was $30,914 higher
than 2002. The growth in 2004 was achieved despite a decline in mortgage banking revenues of $22,988 from record levels in 2003 that were $19,206 higher than 2002. The 2004 increase was primarily in brokerage and insurance commissions, service
charges, trust services and net securities gains, while the rise in 2003 was mainly in brokerage and insurance commissions and service charges in addition to mortgage banking. The continued growth of the past two years reflected Sky Financials
focus on growing its fee-based businesses, in addition to the contribution from acquisitions.



A strategic objective for Sky Financial is to increase total non-interest income as a percent of total revenue (net interest income, fully-tax equivalent plus non-interest income). In 2004, by overcoming the decline
in mortgage banking revenues with strong growth in other fee-based businesses, Sky Financial maintained the contribution of non-interest income at 31% of total revenues, level with 2003, which was up from 30% in 2002.



Table 5Non-Interest Income



|                                             |  |      |         |      |   |         |  |               |         |  |               |   |  |     |  
|-------------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | ------------- | ------- |  | ------------- | - |  | --- | -
|Year ended December 31,                      |  | 2004 |         | 2003 |   | 2002    |  | 2004 Vs. 2003 |         |  | 2003 Vs. 2002 |  
|Trust services income                        |  | $    | 18,281  |      | $ | 14,348  |  | $             | 13,479  |  | 27            | % |  | 6   | %
|Service charges and fees on deposit accounts |  |      | 47,964  |      |   | 38,207  |  |               | 34,499  |  | 26            |   |  | 11  |  
|Mortgage banking income                      |  |      | 24,844  |      |   | 47,832  |  |               | 28,626  |  | (48           | ) |  | 67  |  
|Brokerage and insurance commissions          |  |      | 55,820  |      |   | 42,686  |  |               | 36,848  |  | 31            |   |  | 16  |  
|Net securities gains                         |  |      | 14,569  |      |   | 871     |  |               | 2,479   |  | 1,573         |   |  | (65 | )
|Transaction fees                             |  |      | 13,246  |      |   | 10,506  |  |               | 7,666   |  | 26            |   |  | 37  |  
|Merchant income                              |  |      | 6,929   |      |   | 4,572   |  |               | 3,559   |  | 52            |   |  | 28  |  
|Income from bank-owned life insurance        |  |      | 6,249   |      |   | 6,484   |  |               | 5,817   |  | (4            | ) |  | 11  |  
|International fees                           |  |      | 1,829   |      |   | 1,685   |  |               | 1,544   |  | 9             |   |  | 9   |  
|Other                                        |  |      | 13,686  |      |   | 11,707  |  |               | 13,467  |  | 17            |   |  | (13 | )
|                                             |  |      |         |      |   |         |  |               |         |  |               |   |  |     |  
|Total non-interest income                    |  | $    | 203,417 |      | $ | 178,898 |  | $             | 147,984 |  | 14            | % |  | 21  | %
|                                             |  |      |         |      |   |         |  |               |         |  |               |   |  |     |  





15



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands,
except per share data)



Table 6Mortgage Banking Income



|                               |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|For Period Ending December 31  |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Origination and sales revenue  |  | $    | 27,168  |   |      | $ | 54,280  |      |  | $ | 34,674  |  
|Mortgage loan servicing income |  |      | 13,784  |   |      |   | 10,768  |      |  |   | 6,859   |  
|Amortization expense           |  |      | (15,265 | ) |      |   | (19,495 | )    |  |   | (11,468 | )
|Impairment (charges) recapture |  |      | (843    | ) |      |   | 2,279   |      |  |   | (1,439  | )
|                               |  |      |         |   |      |   |         |      |  |   |         |  
|Total                          |  | $    | 24,844  |   |      | $ | 47,832  |      |  | $ | 28,626  |  
|                               |  |      |         |   |      |   |         |      |  |   |         |  



Mortgage banking income decreased
$22,988 in 2004 after increasing $19,206 in 2003. On a component basis, in 2004 origination and sales revenue decreased $27,112, mortgage loan servicing income increased $3,016 and amortization and impairment charges decreased $1,108. The decrease
in 2004 was primarily due to an unfavorable change in interest rates that impacted the volume of refinance business. The increase in 2003 was primarily due to a favorable interest rate environment, which increased volumes of mortgages originated and
sold. Total volume of loans sold in 2004 was $1,128,777, a decrease of $1,136,904 or 50% from over 2003 after increasing $655,706 or 41% over 2002. An uneven trend in the overall rise in mortgage rates in 2004 in combination with the impact of
mortgage servicing rights acquired in acquisitions led to increased impairment reserves on the mortgage servicing rights. During 2004, Sky Financial recorded impairment charges of $843 as compared to recapturing $2,279 of reserves in 2003.



Brokerage and insurance commissions increased $13,134 or 31%
in 2004 and $5,838 or 16% in 2003. Commissions on insurance products were up 33% in 2004 and 15% in 2003 from increased sales volumes from core business and acquisitions. Sky Financial acquired Spencer-Patterson Insurance Agency, Inc., EOB, Inc. and
Stouffer-Herzog Insurance Agency in 2004 and IBS in 2003. Commissions on investment products rose 12% in 2004 and 22% in 2003 from an increased number of sales representatives and higher volumes.



Service charges and fees on deposit accounts increased $9,757 in 2004 and
$3,708 in 2003. The increase in both years reflected the benefits from growth in deposit accounts, both organic and through acquisition, and fee structure modifications. The growth in deposit accounts was largely driven by Sky Financials sales
and service process, successful sales campaigns targeted to grow retail and commercial deposits and continued emphasis on cross-selling to broaden client relationships.



Trust services income, which continued to be impacted by changes in the equity markets as well as growth from acquisitions
and new business, increased $3,933 or 27% in 2004 after increasing $869 or 6% in 2003. Trust assets under management rose to $4.3 billion at year-end 2004, up from $3.4 billion at the end of 2003.



For the year 2004, Sky Financial realized net gains on the sales of
securities of $14,569 compared with net gains of $871 in 2003 and $2,479 in 2002. The gains in 2004 included $9,278 from the sale of bank equity holdings.



Other income included gains of $967 and $934 in 2004 and 2003 respectively related to the sales of buildings and property.



Non-Interest Expense



Total non-interest expense increased $49,338 or 16% in 2004 compared with an increase of $53,486 or 21% in 2003. In 2004, the acquisition of
Second National in July and other current and prior year acquisitions contributed to the rise in expenses somewhat offset by lower state franchise taxes. In 2003, the acquisitions of Metropolitan, GLB and IBS and the full year impact of the previous
years fourth quarter acquisition of Three Rivers contributed to the rise in expenses, partially offset by lower merger, integration and restructuring expenses. The efficiency ratio, which measures total non-interest expenses, including merger,
integration and restructuring charges, as a percent of total revenues, was 54.17% in 2004, 53.59% in 2003 and 51.52% in 2002. The efficiency ratio is defined as non-interest expense divided by the sum of fully taxable equivalent net interest income
plus non-interest income.



As an active acquirer over the last
three years, Sky Financials expenses have been increased each year for expenses to complete and integrate the new mergers into Sky Financials regional financial services delivery structure. These expenses are included in merger,
integration and restructuring expenses and are more thoroughly described in Note 16 to the financial statements. In addition, acquisitions have increased Sky Financials intangible assets and amortization of intangible assets expense.



Non-interest expense includes costs, other than interest, that
are incurred in the operations of Sky Financial. Table 7 summarizes the components of Sky Financials non-interest expense.



16



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##### Table of Contents

Table 7Non-Interest Expense



|                                              |  |      |         |      |   |         |  |             |         |  |             |   |  |     |  
|--------------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | ----------- | ------- |  | ----------- | - |  | --- | -
|Year ended December 31,                       |  | 2004 |         | 2003 |   | 2002    |  | 2004Vs.2003 |         |  | 2003Vs.2002 |  
|Salaries and employee benefits                |  | $    | 193,611 |      | $ | 165,363 |  | $           | 140,420 |  | 17          | % |  | 18  | %
|Occupancy and equipment expense               |  |      | 59,096  |      |   | 50,025  |  |             | 38,550  |  | 18          |   |  | 30  |  
|Merger, integration and restructuring expense |  |      | 4,542   |      |   | 4,577   |  |             | 10,437  |  | (1          | ) |  | (56 | )
|State franchise taxes                         |  |      | 3,255   |      |   | 8,550   |  |             | 3,365   |  | (62         | ) |  | 154 |  
|Printing and supplies                         |  |      | 6,054   |      |   | 5,834   |  |             | 4,813   |  | 4           |   |  | 21  |  
|Legal and other professional fees             |  |      | 9,426   |      |   | 8,192   |  |             | 7,380   |  | 17          |   |  | 11  |  
|Telephone                                     |  |      | 7,608   |      |   | 6,452   |  |             | 5,715   |  | 18          |   |  | 13  |  
|Loan costs                                    |  |      | 7,827   |      |   | 7,106   |  |             | 4,794   |  | 10          |   |  | 48  |  
|Marketing                                     |  |      | 11,269  |      |   | 9,034   |  |             | 5,782   |  | 25          |   |  | 56  |  
|Amortization of intangible assets             |  |      | 10,979  |      |   | 6,896   |  |             | 4,033   |  | 59          |   |  | 71  |  
|Other                                         |  |      | 42,857  |      |   | 35,157  |  |             | 28,411  |  | 21          |   |  | 24  |  
|                                              |  |      |         |      |   |         |  |             |         |  |             |   |  |     |  
|Total non-interest expense                    |  | $    | 356,524 |      | $ | 307,186 |  | $           | 253,700 |  | 16          | % |  | 21  | %
|                                              |  |      |         |      |   |         |  |             |         |  |             |   |  |     |  



Salaries and employee
benefits increased $28,248 or 17% in 2004 and $24,943 or 18% in 2003. The increases in 2004 and 2003 were primarily due to higher staffing levels, mainly from acquisitions, annual merit increases and rising costs for health and retirement benefits.
Sky Financial supports performance-based compensation and maintains commission and incentive plans, which cover all employees, with incentives related to profitability, growth, asset quality and client service. Performance-based compensation
declined in 2004 after rising in 2003. Sky Financials full-time equivalent employees were 4,001 at December 31, 2004, up from 3,546 at December 31, 2003 and 3,046 at December 31, 2002. In 2004, salaries, wages and incentives increased $20,180
or 16% and employee benefits rose $8,068 or 23%. In 2003, the increases were $19,625 or 18% and $5,318 or 18%, respectively.



Occupancy and equipment expenses increased $9,071 or 18% in 2004 and $11,475 or 30% in 2003. Occupancy expenses increased $5,060 or 24% in 2004 and $5,134
or 33% in 2003 as Sky Financial increased the number of financial centers to 280 at December 31, 2004 from 260 at December 31, 2003 and 230 at year-end 2002. The additional offices resulted from Sky Financials acquisitions and the opening of
five new offices in 2004 and three in 2003. Equipment expenses grew $4,011 or 14% in 2004 and $6,341 or 28% in 2003 to support Sky Financials expansion and as a result of a new technology platform implemented in mid-year 2002.



Merger, integration and restructuring charges were $4,542 in 2004, $4,577 in
2003 and $10,437 in 2002. In 2004, restructuring charges included $3,597 related to acquisition of Second National and $786 related to the acquisition of Prospect. An additional $159 of costs are primarily associated with the divestiture of Sky
Financial Solutions. In 2003, restructuring charges included $1,091 related to the acquisition of Great Lakes Bank and $3,486 related to the Metropolitan Bank acquisition. In 2002, restructuring charges included $5,653 pertaining to Sky
Financials implementation of a new technology platform and associated processes and $4,784 related to the acquisition of Three Rivers Bancorp.



State franchise taxes decreased $5,295 or 62% in 2004 primarily as a result of mergers and changes in Sky Financials tax bases, after increasing
$5,185 in 2003.



Amortization of intangible assets increased
$4,083 in 2004, due to the addition of $31.3 million in core deposit intangibles as the results of acquisitions. In 2003 amortization increased $2,863 due to the addition of $13.6 million in core deposit intangibles as a result of acquisitions.



Loan Portfolio



Sky Financials loan
portfolio at December 31, 2004 totaled $10.6 billion, up from $8.6 billion at December 31, 2003 and $7.3 billion at December 31, 2002. The growth in total loans of 23% in 2004 and 18% in 2003 resulted from acquisitions, which added loans of $1.5
billion and $1.1 billion in 2004 and 2003, respectively, and from Sky Financials emphasis on organic loan growth, which has focused on commercial lending, non-residential mortgages and home equity loans within residential mortgages.



Commercial, financial and agricultural loans comprised 24% of
the total loan portfolio at December 31, 2004. This loan category includes loans to a wide variety of businesses, small and large, across many industries and regions. Sky Financials commercial lending policy requires each loan to have viable
repayment sources.



Commercial loans are evaluated for the
adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the ability of the borrower to repay the loan. In certain instances, collateral is required to provide an additional source of
repayment in the event of default by a commercial borrower. The structure of the collateral package, including the type and amount of the collateral, varies from loan to loan depending on the financial strength of the borrower, the amount and terms
of the loan, and the collateral available to be pledged by the borrower. Credit risk for commercial loans arises from borrowers lacking the ability or willingness to repay the loan, and in the case of secured loans, by a shortfall in the collateral
value in relation to the outstanding loan balance in the event of a default and subsequent liquidation of collateral.



Residential mortgage loans were 27% of the total loan portfolio at December 31, 2004. The residential mortgage portfolio contains loans to consumers
secured by residential mortgages. Sky Financials residential mortgage lending policy requires each loan to have viable repayment sources. Residential mortgage loans are evaluated for the adequacy of these repayment sources at the time of
approval, including credit scores, debt-to-income



17



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##### Table of Contents

Managements Discussion and Analysis of Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



ratios, and collateral values. Credit risk for residential mortgage loans arises from borrowers lacking the ability or willingness to repay
the loan, and by a shortfall in the value of the residential mortgages in relation to the outstanding loan balance in the event of a default and subsequent liquidation of the real estate collateral.



The residential mortgage portfolio includes both conforming and nonconforming
mortgage loans. Conforming mortgage loans represent loans originated in accordance with underwriting standards set forth by the government-sponsored entities (GSEs) of Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage
Corporation (Freddie Mac), and the Government National Mortgage Association (GNMA), who serve as the primary purchasers of loans sold in the secondary mortgage market by mortgage lenders. These loans are generally collateralized by
one-to-four-family residential real estate, have loan-to-collateral value ratios of 80% or less, and are made to borrowers in good credit standing. The right to service the loans and receive servicing fee income is generally retained when conforming
loans are sold.



Included in residential mortgage is the home
equity category, which consists mainly of revolving lines of credit to consumers which are secured by residential real estate. Home equity lines are generally governed by the same lending policies and subject to credit risk as described above for
residential real estate loans.



Construction loans totaled 8%
of Sky Financials total loans at December 31, 2004. The construction category contains loans to individuals for the construction of their residences and, from time to time, to established builders and developers for the construction of
residential homes without an underlying sales contract. Construction loans to individuals are structured to be converted to permanent loans at the end of the construction phase, which typically runs from six months to one year. Substantially all of
these loans are in Sky Financials local markets. Residential construction loans are generally underwritten pursuant to the same guidelines used for originating permanent residential mortgage loans. Terms and rates typically match residential
mortgage loans, except that during the construction phase the borrower pays interest only. The application process for construction loans includes a submission of the plans and costs of the project to be constructed.



Non-residential mortgage loans comprised 33% of total loans at December 31,
2004. The non-residential real estate category contains mortgage loans to developers and owners of commercial real estate. Development lending activities in commercial real estate are based primarily on relationships with developers who are active
in Sky Financials local markets. Commercial real estate loans are governed by the same lending policies and subject to credit risk as described for commercial loans.



Installment and credit cards loans were 8% of the total loans at December 31, 2004. This category includes installment loans
used by clients to purchase automobiles, boats, recreational vehicles, automobile leases and student loans. These consumer loans are generally governed by the same lending policies as described for residential real estate. Credit risk for
installment loans arises from borrowers lacking the ability or willingness to repay the loan, and in the case of secured loans, by a shortfall in the value of the collateral in relation to the outstanding loan balance in the event of a default and
subsequent liquidation of collateral. Credit cards includes the outstanding balances on open-ended credit card accounts and unsecured personal and business lines of credit. Credit card loans are typically unsecured and are generally governed by the
same lending policies as described for residential real estate and consumer loans and are subject to credit risk as described for those loan categories.



Real estate loans, including construction and mortgage loans, approximated 68% of total loans at December 31, 2004, up from 63% at year-end 2003. The rise
reflected stronger growth, including acquisitions, partially offset by declines due to strong refinancing activity.



Commercial loans comprise 24% and 28% of the total loan portfolio for 2004 and 2003, respectively. The lower mix reflects the impact of acquisitions in
2004, while growth in this portfolio reflects new business development in existing regional markets. Sky Financial has participated in a small portfolio of shared national credits. These individual credit relationships total less than one-half of
one percent of the total loan portfolio with the businesses located in our current market area.



The remaining portion of Sky Financials loan portfolio is installment loans, credit card loans and other loans, which decreased to 8% of the loan
portfolio from 9% in the prior year. The decrease is due to a reduced emphasis on indirect auto loans.



As of December 31, 2004, Sky Financial did not have any loan concentrations that exceeded 10% of total loans. Sky Financial monitors the levels of market
segments contained in the loan portfolio.



Table 8Loan Portfolio



|                                             |  |      |            |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|-------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|December 31,                                 |  | 2004 |            |   | 2003 |   |           | 2002 |  |   | 2001      |   |  | 2000 |          
|Real estate loans:                           |  |      |            |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Construction                                 |  | $    | 848,072    |   |      | $ | 491,086   |      |  | $ | 410,955   |   |  | $    | 295,154   |   |  | $ | 210,135   |  
|Residential mortgage                         |  |      | 2,898,875  |   |      |   | 2,045,317 |      |  |   | 1,614,048 |   |  |      | 1,464,572 |   |  |   | 1,866,111 |  
|Non-residential mortgage                     |  |      | 3,498,746  |   |      |   | 2,896,116 |      |  |   | 2,290,053 |   |  |      | 1,719,074 |   |  |   | 1,575,907 |  
|Commercial, financial and agricultural loans |  |      | 2,562,738  |   |      |   | 2,441,225 |      |  |   | 2,168,545 |   |  |      | 1,853,855 |   |  |   | 1,576,504 |  
|Installment and credit card loans            |  |      | 807,687    |   |      |   | 770,901   |      |  |   | 864,387   |   |  |      | 850,343   |   |  |   | 681,750   |  
|                                             |  |      |            |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Total loans                                  |  | $    | 10,616,118 |   |      | $ | 8,644,645 |      |  | $ | 7,347,988 |   |  | $    | 6,182,998 |   |  | $ | 5,910,407 |  
|                                             |  |      |            |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Real estate loans:                           |  |      |            |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Construction                                 |  |      | 8.0        | % |      |   | 5.7       | %    |  |   | 5.6       | % |  |      | 4.8       | % |  |   | 3.6       | %
|Residential mortgage                         |  |      | 27.3       |   |      |   | 23.7      |      |  |   | 22.0      |   |  |      | 23.7      |   |  |   | 31.6      |  
|Non-residential mortgage                     |  |      | 33.0       |   |      |   | 33.5      |      |  |   | 31.2      |   |  |      | 27.7      |   |  |   | 26.7      |  
|Commercial, financial and agricultural loans |  |      | 24.1       |   |      |   | 28.2      |      |  |   | 29.5      |   |  |      | 30.0      |   |  |   | 26.7      |  
|Installment and credit card loans            |  |      | 7.6        |   |      |   | 8.9       |      |  |   | 11.7      |   |  |      | 13.8      |   |  |   | 11.4      |  
|                                             |  |      |            |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Total loans                                  |  |      | 100.0      | % |      |   | 100.0     | %    |  |   | 100.0     | % |  |      | 100.0     | % |  |   | 100.0     | %
|                                             |  |      |            |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  



18



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##### Table of Contents

Table 9 shows the amount of commercial, financial and agricultural loans and real estate construction loans outstanding
as of December 31, 2004, which based on the remaining scheduled repayments of principal, are due in the periods indicated. Also, the amounts due after one year are classified according to their sensitivity to changes in interest rates.



Table 9Loan Maturity and Price Sensitivity



|                                                                   |  |               |           |                         |   |                  |  |       |         |  |   |          
|------------------------------------------------------------------ |  | ------------- | --------- | ----------------------- | - | ---------------- |  | ----- | ------- |  | - | ---------
|December 31, 2004                                                  |  | Due In 1 Year |           | Due In 1 Year - 5 Years |   | Due After5 Years |  | Total
|Commercial, financial and agricultural                             |  | $             | 1,315,927 |                         |   | $1,018,720       |  | $     | 228,091 |  | $ | 2,562,738
|Construction                                                       |  |               | 155,722   |                         |   | 510,360          |  |       | 181,990 |  |   | 848,072  
|                                                                   |  |               |           |                         |   |                  |  |       |         |  |   |          
|Total                                                              |  | $             | 1,471,649 |                         |   | $1,529,080       |  | $     | 410,081 |  | $ | 3,410,810
|                                                                   |  |               |           |                         |   |                  |  |       |         |  |   |          
|Total due after one year:                                          |  |               |           |                         |   |                  |  |       |         |  |   |          
|Fixed rate commercial, financial, agricultural and construction    |  |               |           |                         | $ | 172,785          |  | $     | 15,885  |  | $ | 188,670  
|Variable rate commercial, financial, agricultural and construction |  |               |           |                         |   | 1,356,295        |  |       | 394,196 |  |   | 1,750,491
|                                                                   |  |               |           |                         |   |                  |  |       |         |  |   |          
|Total                                                              |  |               |           |                         | $ | 1,529,080        |  | $     | 410,081 |  | $ | 1,939,161
|                                                                   |  |               |           |                         |   |                  |  |       |         |  |   |          



Actual maturities of loans will differ
from the contractual maturities presented in the table above because of prepayments, rollovers and renegotiation of payment terms, among other factors.



Under-Performing Assets



Residential mortgage, installment and other consumer loans are collectively evaluated for impairment. Individual commercial loans exceeding size thresholds established by management are evaluated for impairment.
Impaired loans are recorded at the loans fair value by the establishment of a specific allowance where necessary. The fair value of the collateral-dependent loans is determined by the fair value of the underlying collateral. The fair value of
noncollateral-dependent loans is determined by discounting expected future interest and principal payments at the loans effective interest rate. At December 31, 2004, impaired loans were $80,757 compared with $61,619 at December 31, 2003, the
increase was due primarily to acquisitions.



Non-accrual loans
are comprised principally of loans 90 days past due as well as certain loans, which are current but where serious doubt exists as to the ability of the borrower to comply with the repayment terms. Interest previously accrued and not yet paid on
non-accrual loans is reversed or charged against the allowance for credit losses during the period in which the loan is placed in a non-accrual status, except where Sky Financial has determined that such loans are adequately secured as to principal
and interest. Interest earned thereafter is included in income only to the extent that it is received in cash. In certain cases, interest received may be credited against principal outstanding under the cost recovery method.



Non-accrual loans increased from $81,979 at December 31, 2003 to $143,207 at
year-end 2004. The increase in non-accrual loans in 2004 has resulted from the overall growth in the loan portfolio last year, including acquisitions. For the year ended December 31, 2004, the amount of interest income that would have been recorded
under the original loan terms for total loans classified as non-accrual and restructured was $11,233. The amount actually collected and recorded, as interest income for these loans, was $1,189.



At December 31, 2004, $34,400 of loans secured by pools of commercial leases
for which payment is over 90 days past due are on non-accrual. These loans are guaranteed by surety bonds or insurance policies issued by three creditworthy insurance companies.



Sky is engaged in litigation with these insurance companies to enforce their payment obligations, as are a number of other
banks nationwide. These non-accrual loans are currently reflected in the consolidated balance sheet at the amount of the unpaid balance, under contractual terms. After consultation with its counsel as to the strength of its position, Sky Financial
believes that the credits are well secured and that the prospects for recovery of its unpaid balance is probable.



At December 31, 2004, non-performing assets were $165,508, an increase from $93,019 at the prior year-end. The increase was primarily in non-performing
loans, which at year-end 2004, totaled $143,748 or 1.35% of total loans outstanding, compared with $82,578 or .96%, of total loans outstanding at year-end 2003. Other non-performing assets increased due to the addition of $11,705 of non-performing
investments. The non-performing investments consist of two securities that are currently on non-accrual, a Franklin County, Ohio revenue bond with a net outstanding balance of $9.4 million and a pooled commercial loan package in partial default with
a net outstanding balance of $2.3 million.



Loans now
performing, but where some concerns exist as to the ability of the borrower to comply with present loan repayment terms (defined as loans rated substandard or worse, but excluding non-accrual and restructured loans), approximated $159,157 and
$98,312 at December 31, 2004 and 2003, respectively, and are being closely monitored by management and the boards of directors of Sky Financial and its subsidiaries. The classification of these loans, however, does not imply that management expects
losses on each of these loans, but believes that a higher level of scrutiny is prudent under the circumstances.



The increase in loans where some concern exists is reflective of growth in the loan portfolio. These loans require close monitoring despite the fact that
they are performing according to their terms. Such classifications relate to specific concerns relating to each individual borrower and do not relate to any concentrated risk elements common to all loans in this group.



19



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##### Table of Contents

Managements Discussion and Analysis of Financial Condition and Results of
Operation

(Dollars and shares in thousands, except per share data)



Table 10Under-Performing Assets



|                                                                     |  |      |         |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|-------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|December 31,                                                         |  | 2004 |         |   | 2003 |   |        | 2002 |  |   | 2001   |   |  | 2000 |       
|Non-accrual loans                                                    |  | $    | 143,207 |   |      | $ | 81,979 |      |  | $ | 66,034 |   |  | $    | 33,319 |   |  | $ | 20,329 |  
|Restructured loans                                                   |  |      | 541     |   |      |   | 599    |      |  |   | 3,203  |   |  |      | 785    |   |  |   | 1,131  |  
|                                                                     |  |      |         |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total non-performing loans                                           |  |      | 143,748 |   |      |   | 82,578 |      |  |   | 69,237 |   |  |      | 34,104 |   |  |   | 21,460 |  
|Other real estate owned                                              |  |      | 10,055  |   |      |   | 10,441 |      |  |   | 4,178  |   |  |      | 2,467  |   |  |   | 2,221  |  
|Non-performing investments                                           |  |      | 11,705  |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|                                                                     |  |      |         |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total non-performing assets                                          |  | $    | 165,508 |   |      | $ | 93,019 |      |  | $ | 73,415 |   |  | $    | 36,571 |   |  | $ | 23,681 |  
|                                                                     |  |      |         |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Loans 90 days or more past due and still accruing interest           |  | $    | 16,243  |   |      | $ | 13,841 |      |  | $ | 12,458 |   |  | $    | 15,897 |   |  | $ | 10,294 |  
|Non-performing loans to total loans                                  |  |      | 1.35    | % |      |   | 0.96   | %    |  |   | 0.94   | % |  |      | 0.55   | % |  |   | 0.36   | %
|Non-performing assets to total loans plus other real estate owned    |  |      | 1.56    |   |      |   | 1.07   |      |  |   | 1.00   |   |  |      | 0.59   |   |  |   | 0.40   |  
|Allowance for credit losses to total non-performing loans            |  |      | 105.32  |   |      |   | 151.30 |      |  |   | 154.07 |   |  |      | 272.20 |   |  |   | 429.12 |  
|Loans 90 days or more past due and not on non-accrual to total loans |  |      | 0.15    |   |      |   | 0.16   |      |  |   | 0.16   |   |  |      | 0.26   |   |  |   | 0.17   |  



Provision and Allowance for Credit Losses



The
provision for credit losses represents the charge to income necessary to adjust the allowance for credit losses to an amount that represents managements assessment of the estimated probable credit losses inherent in Sky Financials loan
portfolio that have been incurred at each balance sheet date. All lending activity contains associated risks of loan losses. Sky Financial recognizes these credit risks as a necessary element of its business activity. To assist in identifying and
managing potential loan losses, Sky Financial maintains a loan review function that continuously evaluates individual credit relationships as well as overall loan portfolio conditions. One of the primary objectives of this loan review function is to
make recommendations to management as to both specific loss reserves and overall portfolio loss reserves.



The provision for credit losses for 2004 was $37,660 compared with $34,125 for 2003 and $37,659 in 2002. The 2004 change in the provision for credit
losses was attributable to higher levels of net charge offs and growth in the loan portfolio.



The 2003 change in the provision for credit losses was attributable to improved asset quality, which was a function of the improving economy, partially offset by growth in the loan portfolio. The 2002 increase in
provision for credit losses reflected the increases in net charge-offs and non-performing loans, including the transfer to non-accrual of the $22,800 of loans secured by pools of commercial leases and guaranteed by surety bonds or insurance
policies.



Table 11Allowance for
Credit Losses



|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|Year Ended December 31,                                   |  | 2004 |         |   | 2003 |   |         | 2002 |  |   | 2001    |   |  | 2000 |        
|Balance at beginning of the year                          |  | $    | 124,943 |   |      | $ | 106,675 |      |  | $ | 92,831  |   |  | $    | 92,089  |   |  | $ | 86,750  |  
|Loans charged-off:                                        |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Real estate                                               |  |      | (9,534  | ) |      |   | (10,021 | )    |  |   | (7,898  | ) |  |      | (2,926  | ) |  |   | (1,798  | )
|Commercial, financial and agricultural loans              |  |      | (15,293 | ) |      |   | (9,615  | )    |  |   | (9,042  | ) |  |      | (10,826 | ) |  |   | (4,740  | )
|Installment and credit card                               |  |      | (18,750 | ) |      |   | (21,554 | )    |  |   | (19,700 | ) |  |      | (17,467 | ) |  |   | (13,678 | )
|Other loans                                               |  |      | (58     | ) |      |   | (373    | )    |  |   | (860    | ) |  |      |         |   |  |   | (453    | )
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total charge-offs                                         |  |      | (43,635 | ) |      |   | (41,563 | )    |  |   | (37,500 | ) |  |      | (31,219 | ) |  |   | (20,669 | )
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Recoveries:                                               |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Real estate                                               |  |      | 2,649   |   |      |   | 1,320   |      |  |   | 1,011   |   |  |      | 376     |   |  |   | 1,032   |  
|Commercial, financial and agricultural loans              |  |      | 1,646   |   |      |   | 2,197   |      |  |   | 995     |   |  |      | 1,226   |   |  |   | 3,483   |  
|Installment and credit card                               |  |      | 4,403   |   |      |   | 5,126   |      |  |   | 4,795   |   |  |      | 2,943   |   |  |   | 3,567   |  
|Other loans                                               |  |      |         |   |      |   | 4       |      |  |   | 2       |   |  |      | 32      |   |  |   | 132     |  
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total recoveries                                          |  |      | 8,698   |   |      |   | 8,647   |      |  |   | 6,803   |   |  |      | 4,577   |   |  |   | 8,214   |  
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net loans charged-off                                     |  |      | (34,937 | ) |      |   | (32,916 | )    |  |   | (30,697 | ) |  |      | (26,642 | ) |  |   | (12,455 | )
|Provision charged to operating expense                    |  |      | 37,660  |   |      |   | 34,125  |      |  |   | 37,659  |   |  |      | 27,384  |   |  |   | 17,794  |  
|Allowance for acquired institutions / sold portfolio      |  |      | 23,723  |   |      |   | 17,059  |      |  |   | 6,882   |   |  |      |         |   |  |   |         |  
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance at the end of the year                            |  | $    | 151,389 |   |      | $ | 124,943 |      |  | $ | 106,675 |   |  | $    | 92,831  |   |  | $ | 92,089  |  
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net charge-offs to average loans outstanding              |  |      | 0.37    | % |      |   | 0.40    | %    |  |   | 0.47    | % |  |      | 0.40    | % |  |   | 0.22    | %
|Allowance for credit losses to total loans                |  |      | 1.43    |   |      |   | 1.45    |      |  |   | 1.45    |   |  |      | 1.50    |   |  |   | 1.56    |  
|Allowance for credit losses to total non-performing loans |  |      | 105.32  |   |      |   | 151.30  |      |  |   | 154.07  |   |  |      | 272.20  |   |  |   | 429.12  |  



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Sky Financial maintains an allowance for credit losses at a level adequate to absorb managements estimate of
probable losses inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance.



The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For
construction, commercial and commercial real estate loans, loss factors are applied based on internal risk grades of these loans. For residential real estate, installment, credit card and other loans, loss factors are applied on a portfolio basis.
Loss factors are based on Sky Financials historical loss experience and are reviewed for modification on a quarterly basis, along with other factors affecting the collectibility of the loan portfolio.



Specific allowances are established for all criticized and classified loans,
where management has determined that, due to identified significant conditions, it is probable that a loss has been incurred that exceeds the general allowance loss factor for those loans. The unallocated allowance recognizes the estimation risk
associated with the allocated general and specific allowances and incorporates managements evaluation of existing conditions that are not included in the allocated allowance determinations. These conditions are reviewed quarterly by management
and include general economic conditions, credit quality trends, and internal loan review and regulatory examination findings.



Table 12Allocation of the Allowance for Credit Losses



|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------ | - |  | - | ------ | -
|December 31,                                     |  | 2004 |         |   | 2003 |   |         | 2002 |  |   | 2001    |   |  | 2000 |       
|Specific                                         |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Real estate                                      |  | $    | 3,860   |   |      | $ | 4,185   |      |  | $ | 2,689   |   |  | $    | 1,427  |   |  | $ | 784    |  
|Commercial, financial and agricultural           |  |      | 4,054   |   |      |   | 2,738   |      |  |   | 3,468   |   |  |      | 1,032  |   |  |   | 195    |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Sub-total                                        |  |      | 7,914   |   |      |   | 6,923   |      |  |   | 6,157   |   |  |      | 2,459  |   |  |   | 979    |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|General                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Construction                                     |  |      | 4,720   |   |      |   | 2,295   |      |  |   | 2,257   |   |  |      | 2,387  |   |  |   | 1,132  |  
|Real estate                                      |  |      | 54,833  |   |      |   | 42,485  |      |  |   | 33,382  |   |  |      | 27,904 |   |  |   | 26,307 |  
|Commercial, financial and agricultural           |  |      | 46,441  |   |      |   | 37,229  |      |  |   | 29,052  |   |  |      | 21,745 |   |  |   | 20,253 |  
|Installment and credit card                      |  |      | 26,936  |   |      |   | 26,519  |      |  |   | 25,754  |   |  |      | 26,855 |   |  |   | 26,614 |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Sub-total                                        |  |      | 132,930 |   |      |   | 108,528 |      |  |   | 90,445  |   |  |      | 78,891 |   |  |   | 74,306 |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Total allocated                                  |  |      | 140,844 |   |      |   | 115,451 |      |  |   | 96,602  |   |  |      | 81,350 |   |  |   | 75,285 |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Unallocated                                      |  |      | 10,545  |   |      |   | 9,492   |      |  |   | 10,073  |   |  |      | 11,481 |   |  |   | 16,804 |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Total                                            |  | $    | 151,389 |   |      | $ | 124,943 |      |  | $ | 106,675 |   |  | $    | 92,831 |   |  | $ | 92,089 |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Percent of loans in each category to total loans |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Construction                                     |  |      | 8.0     | % |      |   | 5.7     | %    |  |   | 5.6     | % |  |      | 4.8    | % |  |   | 3.6    | %
|Real estate                                      |  |      | 60.3    |   |      |   | 57.2    |      |  |   | 53.2    |   |  |      | 51.4   |   |  |   | 58.3   |  
|Commercial, financial and agricultural           |  |      | 24.1    |   |      |   | 28.2    |      |  |   | 29.5    |   |  |      | 30.0   |   |  |   | 26.7   |  
|Installment and credit card                      |  |      | 7.6     |   |      |   | 8.9     |      |  |   | 11.7    |   |  |      | 13.8   |   |  |   | 11.4   |  
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Total                                            |  |      | 100.0   | % |      |   | 100.0   | %    |  |   | 100.0   | % |  |      | 100.0  | % |  |   | 100.0  | %
|                                                 |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  



At December 31, 2004, the allowance
for credit losses was $151,389 or 1.43% of total loans outstanding, and 105% of total non-performing loans compared to an allowance at December 31, 2003 of $124,943 or 1.45% of total loans outstanding, and 151% of total non-performing loans. At
year-end 2004, the allocated portion of the allowance for credit losses was $140,844, compared with $115,451 at year-end 2003.



The increase to the allowance in 2004 and 2003 was due primarily to the overall growth in total loans of 23% and 18%, respectively, and the adjustment of
loss factors for components of certain segments within the loan portfolio. The allowance allocated to the loans secured by pools of commercial leases and guaranteed by surety bonds or insurance policies increased in 2004 and 2003 due to the increase
in loan balances to $34,400 in 2004 and $26,637 in 2003 from $22,800 in 2002 as a result of additional loans acquired from the mergers of Second Bancorp and Metropolitan. At year-end 2004, the unallocated portion of the allowance for credit losses
was $10,545 compared with $9,492 at year-end 2003 and $10,073 at year-end 2002.



The increase in the allowance for 2002 was due primarily to the overall growth in the portfolio, which included the acquisition of Three Rivers, and the increase in non-performing loans, which included the transfer to
non-accrual of $22,800 of loans secured by pools of commercial leases and guaranteed by surety bonds or insurance policies. The decrease in the unallocated allowance was attributable to an increase in Sky Financials estimated risk associated
with its specific allowances, and the impact of mergers, while the outlook for general economic conditions has stabilized.



Net charge-offs increased to $34,937 compared with $32,916 in 2003 and $30,697 in 2002, mainly due to the increased size of the loan portfolio. Net
charge-offs as a percentage of average loans outstanding actually declined in 2004 to .37% from .40% in 2003 and .47% in 2002.





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Managements Discussion and Analysis of Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



Securities



The investment portfolio at Sky
Financial is used as a management tool to maintain acceptable levels of liquidity and exposure to changes in market interest rates. The portfolio yield is maximized once these criteria are satisfied. In recent years, the portfolio has shifted to
include a greater percentage of mortgage-backed securities. Mortgage-backed securities offer monthly principal and interest and may be used as collateral in a variety of financial transactions to secure sources of whole-sale funding. The market for
agency mortgage-backed securities is large and liquid. It is the practice of Sky Financial to purchase mortgage-backed securities with average expected lives of two to five years. Because this type of security may extend or contract, a pre-purchase
analysis is completed. Most securities purchased have structures that limit changes to duration as market rates change. The following table documents the fair value of the available for sale portfolio by product.



Table 13Securities Available for Sale



|                                                 |  |                      |           |      |   |           |  |   |          
|------------------------------------------------ |  | -------------------- | --------- | ---- | - | --------- |  | - | ---------
|                                                 |  | Estimated Fair Value
|December 31,                                     |  | 2004                 |           | 2003 |   | 2002     
|U.S. Treasury                                    |  | $                    | 207       |      | $ | 211       |  | $ | 215      
|U.S. government agencies and corporations        |  |                      | 152,266   |      |   | 325,947   |  |   | 466,349  
|Obligations of states and political subdivisions |  |                      | 16,561    |      |   | 22,337    |  |   | 15,242   
|Corporate and other securities                   |  |                      | 51,699    |      |   | 69,446    |  |   | 71,896   
|Mortgage-backed securities                       |  |                      | 2,706,552 |      |   | 1,955,606 |  |   | 1,584,861
|                                                 |  |                      |           |      |   |           |  |   |          
|Total debt securities available for sale         |  |                      | 2,927,285 |      |   | 2,373,547 |  |   | 2,138,563
|                                                 |  |                      |           |      |   |           |  |   |          
|Marketable equity securities                     |  |                      | 29,865    |      |   | 45,862    |  |   | 40,905   
|FHLB, FRB & Bankers Bank stock                  |  |                      | 134,663   |      |   | 91,960    |  |   | 67,713   
|                                                 |  |                      |           |      |   |           |  |   |          
|Total securities available for sale              |  | $                    | 3,091,813 |      | $ | 2,511,369 |  | $ | 2,247,181
|                                                 |  |                      |           |      |   |           |  |   |          



In 2004, total securities available
for sale increased $580,444 primarily as a result of the acquisitions of Second Bancorp and Prospect. During 2004, Sky purchased $1,052,584 in securities. Maturities, calls and principal repayments totaled $754,932 and sales of investments totaled
$225,923 that resulted in a net gain of $14,569.



Out of the
securities sold, $102,737 were sold and proceeds were reinvested in strategies to manage the companys liquidity and interest rate risk management objectives. The available for sale investment portfolio along with wholesale funding and interest
rate derivatives (i.e. interest rate swaps, caps and floors) provides the company with the ability to manage liquidity and interest rate risk as the broader balance sheet and market conditions warrant. From time to time adjustments in holdings of
various types of investments may be necessary to maintain prudent positioning of the total balance sheet. The management team through the Asset Liability Committee reviews potential adjustments monthly. A net gain of $1,460 was recognized on these
sales.



Securities sold totaling $76,978 were mortgage-backed
securities that had paid down significantly from the original purchase amount. Among the issues considered by management in the decision to sell mortgage-backed securities that have paid down significantly included the market value of the
investment, the current book yield, the remaining expected life of the investment, the cost of administration of the security, the stability of the expected remaining life and the likely reinvestment rate. Portfolio management is enhanced by
maintaining the number of bonds in the portfolio to a reasonable number. The sale of these securities resulted in a $2,060 net gain for the year.



In addition, $46,208 of other investments consisting of equities and corporate debt issued by financial institutions and government-sponsored enterprises
were sold during the year at a net gain of $9,592.



In addition
to the securities sold above, an additional $205,084 in securities were sold during the integration of Second Bancorp into Sky Financial. These investments were liquidated during the third quarter because they did not conform to the extension risk
parameters of the broader securities portfolio. A net gain of $1,457 was recognized on the sale of these assets due to changes in market interest rates between the merger date and the day each investment was sold.



In 2003, total securities available for sale increased $264,188 primarily due
to the acquisition of Metropolitan and GLB, which added $188,347 and $42,839, respectively, to the portfolio. During 2003, $2,051,780 in securities were purchased, excluding portfolios acquired through the mergers with Metropolitan and GLB, while
principal from maturities, calls and payments totaled $1,499,132 and sales totaled $416,526.



The portfolio contains mortgage-backed securities and, to a limited extent, other securities, that have uncertain cash flow characteristics. The variable cash flows present additional risk to Sky Financial in the form
of prepayment or extension risk primarily caused by changes in market interest rates. This additional risk is generally rewarded in the form of higher yields.



Sky Financial utilizes a variety of tools to monitor and minimize this risk. All securities must pass a stress test at the time of purchase estimating
how the security would perform in various interest rate environments. Additionally, the corporate investment policy defines certain types of high-risk securities ineligible for purchase, including securities that may not return full principal to Sky
Financial. It is also the practice of Sky Financial to minimize premiums paid on mortgage securities to avoid yield reduction if prepayments accelerate. The total premium on mortgage securities was .43% as of December 2004 compared to .78% in
December 2003. These policies help to ensure that there will be no material impact from these investments to the financial statements due to changes in market interest rates, which may shorten the average life of the portfolio.



Expected maturities of individual securities will differ from contractual
maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are presented in the table based on current prepayment assumptions. The weighted average yields on
income from tax-exempt obligations of state and political subdivisions have been adjusted to a tax equivalent basis. Table 14 shows (at amortized cost) the contractual maturities and weighted average yields of Sky Financials securities as of
December 31, 2004.



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Table 14Maturity Distribution of Debt Securities Portfolio (At Amortized Cost)



|                                                 |  |               |         |       |           |   |        |            |           |  |               |        |  |       |         |  |        |   |       |   |         |  |      |  
|------------------------------------------------ |  | ------------- | ------- | ----- | --------- | - | ------ | ---------- | --------- |  | ------------- | ------ |  | ----- | ------- |  | ------ | - | ----- | - | ------- |  | ---- | -
|                                                 |  | Within 1 Year |         |       | 1-5 Years |   |        | 5-10 Years |           |  | Over 10 Years |       
|December 31, 2004                                |  | Amount        |         | Yield |           |   | Amount |            | Yield     |  |               | Amount |  | Yield |         |  | Amount |   | Yield |  
|U.S. Treasury                                    |  | $             | 100     |       | 1.59      | % |        | $          | 100       |  | 5.48          | %      |  | $     |        |  |       |   |       | $ |        |  |     |  
|U.S. government agencies and corporations        |  |               |        |       |          |   |        |            | 131,419   |  | 3.44          |        |  |       | 20,000  |  | 3.00   |   |       |   | 1,349   |  | 5.12 | %
|Obligations of states and political subdivisions |  |               | 889     |       | 1.82      |   |        |            | 709       |  | 7.49          |        |  |       | 1,562   |  | 4.76   |   |       |   | 13,286  |  | 1.27 |  
|Corporate and other securities                   |  |               | 250     |       | 6.99      |   |        |            | 1,050     |  | 3.72          |        |  |       |        |  |       |   |       |   | 48,829  |  | 5.60 |  
|Mortgage-backed securities                       |  |               | 659,232 |       | 4.22      |   |        |            | 1,486,687 |  | 4.22          |        |  |       | 492,978 |  | 4.28   |   |       |   | 80,523  |  | 4.43 |  
|                                                 |  |               |         |       |           |   |        |            |           |  |               |        |  |       |         |  |        |   |       |   |         |  |      |  
|Total debt securities available for sale         |  | $             | 660,471 |       | 4.22      | % |        | $          | 1,619,965 |  | 4.16          | %      |  | $     | 514,540 |  | 4.23   | % |       | $ | 143,987 |  | 4.54 | %
|                                                 |  |               |         |       |           |   |        |            |           |  |               |        |  |       |         |  |        |   |       |   |         |  |      |  



Sky Financial evaluates its securities
portfolio for other than temporary impairment throughout the year. Sky Financial complies with SFAS 115 and SAB 59 in the determination of whether investment impairment is other than temporary. Each investment, which has an indicative market value
less than the book value is reviewed on a monthly basis by management. Management considers at a minimum the following factors that, both individually or in combination, could indicate that the decline is other than temporary:
1) the length of time and extent to which the market value has been less than book value; 2) the financial condition and near-term prospects of the issuer; or 3) the intent and ability of Sky Financial to retain the investment in the issuer for
a period of time sufficient to allow for any anticipated recovery in market value. Among the factors that are considered in determining intent and ability is a review of capital adequacy, interest rate risk profile and liquidity at Sky Financial.



An impairment is recorded against individual securities if the
review described above concludes that the decline in value is other than temporary. The securities portfolio as of December 31, 2004 contains two investments that have been determined to be other than temporarily impaired. Both of the securities
were acquired as part of the companys 2003 merger with Metropolitan. Both securities were reduced in value as of their acquisition and a further discussion of these assets is contained in Managements discussion of Under-Performing
Assets. The following table documents the amount of securities by type that are currently carried above the fair market value. It also indicates the amount of securities that have been below market value for more than one year. The table also
indicates the anticipated recovery period that represents the market consensus on the duration of the investments based on market assumptions.



Table 15Securities (Gross Unrealized Losses)



|                                                 |  |            |           |             |                       |                       |  |   |           |   |            |   |                       |  |   |                                    |  |   |        |   |  |    
|------------------------------------------------ |  | ---------- | --------- | ----------- | --------------------- | --------------------- |  | - | --------- | - | ---------- | - | --------------------- |  | - | ---------------------------------- |  | - | ------ | - |  | ---
|                                                 |  | Total      |           |             | Greater than one year
|December 31, 2004                                |  | Book Value |           | Fair Market |                       | GrossUnrealizedLosses |  |   | BookValue |   | FairMarket |   | GrossUnrealizedLosses |  |   | AnticipatedRecoveryPeriod in years
|U. S. Treasury                                   |  | $          | 100       |             | $                     | 100                   |  | $ |          |   |            | $ |                      |  | $ |                                   |  | $ |       |   |  |   
|U. S. government agencies and corporations       |  |            | 112,934   |             |                       | 111,866               |  |   | (1,068    | ) |            |   |                      |  |   |                                   |  |   |       |   |  |   
|Obligations of states and political subdivisions |  |            | 1,236     |             |                       | 1,224                 |  |   | (12       | ) |            |   | 1,236                 |  |   | 1,224                              |  |   | (12    | ) |  | 6.2
|Corporate and other securities                   |  |            | 7,638     |             |                       | 7,433                 |  |   | (205      | ) |            |   |                      |  |   |                                   |  |   |       |   |  |   
|Mortgage-backed securities                       |  |            | 1,647,224 |             |                       | 1,624,024             |  |   | (23,200   | ) |            |   | 328,818               |  |   | 320,305                            |  |   | (8,513 | ) |  | 3.2
|                                                 |  |            |           |             |                       |                       |  |   |           |   |            |   |                       |  |   |                                    |  |   |        |   |  |    
|Total debt securities for sale                   |  |            | 1,769,132 |             |                       | 1,744,647             |  |   | (24,485   | ) |            |   | 330,054               |  |   | 321,529                            |  |   | (8,525 | ) |  | 3.2
|Marketable equity securities                     |  |            | 7,948     |             |                       | 7,870                 |  |   | (78       | ) |            |   | 500                   |  |   | 492                                |  |   | (8     | ) |  | 1.0
|                                                 |  |            |           |             |                       |                       |  |   |           |   |            |   |                       |  |   |                                    |  |   |        |   |  |    
|Total securities available for sale              |  | $          | 1,777,080 |             | $                     | 1,752,517             |  | $ | (24,563   | ) |            | $ | 330,554               |  | $ | 322,021                            |  | $ | (8,533 | ) |  | 3.2
|                                                 |  |            |           |             |                       |                       |  |   |           |   |            |   |                       |  |   |                                    |  |   |        |   |  |    



There are no securities of any single
issuer where the aggregate carrying value of such securities exceed 10% of shareholders equity, except those of the U.S. Treasury, U.S. Government agencies and substantially all mortgage-backed securities issued by Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association and Government National Mortgage Association.



Funding Sources



Sky Financial obtains
its funding through a variety of sources. Retail deposits are gathered from individuals and businesses within the local communities served by the banking affiliate. Deposits encompass the full range of banking products including checking, savings
and time deposits. In addition, Sky Financial obtains funds under a number of borrowing arrangements. The banking affiliate is a member of the Federal Home Loan Bank and may obtain both overnight and term advances. The banking affiliate also obtains
funds through securities sold under repurchase agreements and federal funds lines. The parent company maintains a line of credit with a group of non-affiliated banks.



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##### Table of Contents

Managements Discussion and Analysis of Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



Table 16Funding Sources



|                                                           |  |                             |            |                   |   |            |  |      |           |  |      |   |  |      |   |  |      |  
|---------------------------------------------------------- |  | --------------------------- | ---------- | ----------------- | - | ---------- |  | ---- | --------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                                           |  | Average Amounts Outstanding |            | Average Rate Paid |  
|Year Ended December 31,                                    |  | 2004                        |            | 2003              |   | 2002       |  | 2004 |           |  | 2003 |   |  | 2002 |  
|Non-interest-bearing demand deposits                       |  | $                           | 1,402,627  |                   | $ | 1,113,236  |  | $    | 864,115   |  |      |   |  |      |   |  |      |  
|Interest-bearing demand deposits                           |  |                             | 298,742    |                   |   | 220,891    |  |      | 107,325   |  | 0.79 | % |  | 0.61 | % |  | 0.75 | %
|Savings deposits                                           |  |                             | 3,767,873  |                   |   | 3,343,474  |  |      | 2,660,130 |  | 0.76 |   |  | 0.91 |   |  | 1.34 |  
|Time deposits                                              |  |                             | 4,035,606  |                   |   | 3,728,437  |  |      | 3,384,936 |  | 2.75 |   |  | 2.99 |   |  | 4.13 |  
|                                                           |  |                             |            |                   |   |            |  |      |           |  |      |   |  |      |   |  |      |  
|Total deposits                                             |  |                             | 9,504,848  |                   |   | 8,406,038  |  |      | 7,016,506 |  |      |   |  |      |   |  |      |  
|Short-term borrowings                                      |  |                             | 897,438    |                   |   | 849,464    |  |      | 732,230   |  | 2.08 |   |  | 2.17 |   |  | 2.65 |  
|Trust preferred securities/ Junior subordinated debentures |  |                             | 174,385    |                   |   | 150,001    |  |      | 110,687   |  | 4.99 |   |  | 5.02 |   |  | 7.00 |  
|Debt and FHLB advances                                     |  |                             | 1,427,547  |                   |   | 1,041,429  |  |      | 763,119   |  | 2.91 |   |  | 3.23 |   |  | 4.16 |  
|                                                           |  |                             |            |                   |   |            |  |      |           |  |      |   |  |      |   |  |      |  
|Total funding sources                                      |  | $                           | 12,004,218 |                   | $ | 10,446,932 |  | $    | 8,622,542 |  |      |   |  |      |   |  |      |  
|                                                           |  |                             |            |                   |   |            |  |      |           |  |      |   |  |      |   |  |      |  



Table 17 is a schedule
of maturities of time deposits in denominations of $100,000 or more as of December 31, 2004 and 2003:



Table 17Maturity of Time Deposits of $100,000 or More



|                          |  |      |           |      |   |          
|------------------------- |  | ---- | --------- | ---- | - | ---------
|December 31,              |  | 2004 |           | 2003
|Three months or less      |  | $    | 358,600   |      | $ | 312,688  
|Three through six months  |  |      | 213,830   |      |   | 228,335  
|Six through twelve months |  |      | 336,278   |      |   | 194,922  
|Over twelve months        |  |      | 671,250   |      |   | 373,422  
|                          |  |      |           |      |   |          
|Total                     |  | $    | 1,579,958 |      | $ | 1,109,367
|                          |  |      |           |      |   |          



Short-Term Borrowings



Table 18 sets forth
certain information relative to borrowed funds with original maturities of less than one year. Included in these borrowed funds are federal funds purchased, advances from the FHLB, securities sold under agreements to repurchase and bank lines of
credit.



Table 18Short-Term Borrowings



|                                                     |  |      |           |   |      |   |           |      |  |   |           |  
|---------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|December 31,                                         |  | 2004 |           |   | 2003 |   |           | 2002 | 
|Balance at period-end                                |  | $    | 1,282,644 |   |      | $ | 1,397,128 |      |  | $ | 958,125   |  
|Weighted average interest rate at period-end         |  |      | 2.01      | % |      |   | 0.94      | %    |  |   | 1.13      | %
|Maximum outstanding at any month-end during the year |  | $    | 1,286,337 |   |      | $ | 1,397,128 |      |  | $ | 1,035,221 |  
|Average amount outstanding                           |  |      | 1,109,910 |   |      |   | 952,831   |      |  |   | 816,119   |  
|Weighted average rates during the year               |  |      | 1.25      | % |      |   | 1.10      | %    |  |   | 1.45      | %



For further information on the
securities sold under agreements to repurchase, see Note 8 of the Financial Statements.



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##### Table of Contents

Contractual Obligations and Commitments



Table 19 presents, as of December 31, 2004, Sky Financials significant fixed and determinable contractual obligations by payment date.
The payment amounts represent those amounts due to the recipient and do not include any unamortized premiums or discounts or other similar carrying amount adjustments. Deposits without a stated maturity have been placed in the one year and less
category for this presentation based on the clients ability to withdraw on a daily basis. However, from a practical standpoint, these deposits provide a stable long-term source of funding.



Table 19Contractual Obligations



|                                                                        |  |                  |           |                   |   |                    |  |                |         |       |   |         |  |   |          
|----------------------------------------------------------------------- |  | ---------------- | --------- | ----------------- | - | ------------------ |  | -------------- | ------- | ----- | - | ------- |  | - | ---------
|Note                                                                    |  | One Year or Less |           | One toThree Years |   | Three toFive Years |  | Over FiveYears |         | Total
|Deposits without a stated maturity                                      |  | $                | 5,793,204 |                   | $ |                   |  | $              |        |       | $ |        |  | $ | 5,793,204
|Certificates of deposit                                                 |  |                  | 2,306,005 |                   |   | 1,855,275          |  |                | 342,847 |       |   | 49,153  |  |   | 4,553,280
|Federal Funds purchased and securities sold under repurchase agreements |  |                  | 782,644   |                   |   | 86,000             |  |                | 139,000 |       |   | 30,000  |  |   | 1,037,644
|Debt and FHLB borrowings                                                |  |                  | 739,733   |                   |   | 317,521            |  |                | 220,405 |       |   | 413,957 |  |   | 1,691,616
|Junior subordinated debentures                                          |  |                  |          |                   |   |                   |  |                |        |       |   | 182,185 |  |   | 182,185  



Sky Financial obtains
its funding from a variety of sources including retail and commercial deposits, securities sold under agreement to repurchase, federal funds purchased, FHLB advances, and debt securities offered by Sky Financial. By utilizing a mixture of these
funding sources, Sky Financial is able to manage its contractual repayment dates.



Sky Financial also enters into derivative contracts under which it is required to either receive cash or pay cash to counterparties depending on changes in interest rates. Derivative contracts are carried at their
fair value on the consolidated balance sheet with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The contracts are primarily interest rate
swaps and cash is settled quarterly. Because the derivative contracts recorded on the balance sheet at December 31, 2004, do not represent amounts that will ultimately be received or paid under these contracts, they are excluded from the table
above. A schedule of significant off-balance sheet commitments at December 31, 2004, is included in Table 20.



Table 20Significant Commitments



|                             |  |      |           |      |   |          
|---------------------------- |  | ---- | --------- | ---- | - | ---------
|                             |  | 2004 |           | 2003
|Commitments to extend credit |  | $    | 2,981,831 |      | $ | 2,320,451
|Standby letters of credit    |  |      | 343,130   |      |   | 331,082  
|Letters of credit            |  |      | 7,173     |      |   | 2,124    



These commitments are
extended to clients in the normal course of business and are subject to the same credit policies as making on-balance commitments. Because many of the commitments are expected to expire without being drawn upon, the total amounts do not represent
future cash flow requirements.



Liquidity Management



Management of liquidity is of continuing importance to the banking industry. The liquidity
of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows of deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial
obligations is a function of balance sheet structure, the ability to liquidate assets and the availability of alternative sources of funds. To meet the needs of the clients and manage the risk of the bank, financial institutions have developed
innovative ways to meet clients needs while at the same time manage both liquidity and interest rate risk. This is being done primarily through liquidity management and the balance of deposit growth and alternative sources of borrowing.



Certificates of deposit provide Sky Financial with a dependable source of
funding. However, market pricing can be highly competitive and this source of funds must be prudently managed. As of December 31, 2004, a total of $2,311,113 of time deposits would mature in the next twelve months. The maturities are reasonably
disbursed across the year and there are no unusual concentrations of individual clients. At Sky Financial, time deposit maturities are monitored through the corporate Asset/ Liability Committee (ALCO). Maturing balances are summarized by month,
original term and existing rate within each of the eight regional market areas. Heavy maturity periods are monitored closely and proactive marketing plans are created that address both the client and Sky Financials needs and preferences.
Regional management along with funds management meets weekly to discuss general economic and market conditions. During this meeting, each region reports the results of the prior weeks pricing and promotional efforts. Each region then
determines its rates for the coming week. Regional pricing allows Sky Financial to attract deposits at the most efficient cost available. Retained time deposits are monitored and the percent retained is reported monthly to ALCO.



Management of Sky Financial is confident that a significant portion of the
scheduled maturities will be retained in 2005. In the unlikely event that these are not retained by Sky Financial, a minimum liquidity ratio has been established at 10% of non-collateralized liabilities. This 10% ratio consists of readily marketable
securities and unused borrowing capacity. At least 8% of the assets must be in unencumbered marketable assets. In addition, Sky Financial has a standing contingent liquidity management plan that prioritizes the steps needed to compensate for
temporary disruptions in liquidity.



In addition to maintaining
a stable core deposit base, Sky Financials banking subsidiary maintains adequate liquidity primarily through the use of investment securities, unused borrowing capacity, security repurchase agreements and federal funds purchased.



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##### Table of Contents

Managements Discussion and Analysis of Financial Condition and Results of
Operation

(Dollars and shares in thousands, except per share data)



At December 31, 2004, securities with maturities of one year or less totaled
$1,435. In addition, the mortgage-backed securities provide an estimated cash flow of approximately $659,232 over a twelve-month timeframe. The banking subsidiary is a member of the Federal Home Loan Bank (FHLB). The FHLB provides a reliable source
of funds with a wide variety of terms and structures. As of December 31, 2004, the banking subsidiary had total credit availability with the FHLB of $1,681,257, of which, $1,569,556 was outstanding. As of January 2005, the credit availability at the
FHLB will increase by approximately $180,000 due to the positive outcome of a collateral review conducted by the FHLB.



As of the end of 2004, Sky Financial had announced its intention to acquire Belmont Bancorp. As part of this transaction, if approved by Belmont
shareholders and regulators, Sky would be obligated to pay approximately $18,600 in cash to complete the transaction. In addition, Sky has announced a share repurchase program for up to two million shares. Based upon December 31, 2004 closing price,
approximately $57,340 would be needed to buy the maximum number of shares. As of December 31, 2004, the parent company had $94,920 in cash available. This amount, along with current dividend availability from the banking affiliate plus anticipated
earnings for 2005, would appear adequate to meet these demands.



Sky Financial is a holding company and does not conduct operations. Its primary sources of liquidity are borrowings from outside sources and dividends received from its subsidiaries. For the banking subsidiary, regulatory approval is
required in order to pay dividends in excess of the subsidiarys earnings retained for the current year plus retained net profits for the prior two years. At December 31, 2004, $51,608 was available for distribution to Sky Financial as
dividends without prior regulatory approval.



Sky Financial
maintains a $100,000 line of credit with a group of unaffiliated banks that expires May 27, 2005. It is anticipated that the line will be renewed. As of December 31, 2004, Sky Financial had no outstanding balance on the line of credit.



The corporation manages liquidity risk in accordance with established
policies primarily through the ALCO. Management has increased its monitoring of liquidity levels and has implemented strategies to increase liquidity. Strategies implemented over 2004 include new retail, deposit retention and growth initiatives, an
increased portfolio of a laddered maturity of brokered CDs and additional federal funds lines.



Capital Resources



Shareholders
equity at year-end 2004 totaled $1,470,955 compared to $998,576 at December 31, 2003, an increase of 47%. The increase was primarily due to net retained earnings (net income less dividends) of $109,541 and the issuance of stock for the acquisitions
of Second Bancorp and Prospect.



The Federal Reserve Board has
established risk-based capital guidelines that must be observed by financial holding companies and banks. Sky Financial has consistently maintained the regulatory capital ratios of the corporation and its bank above well capitalized
requirements. Under capital adequacy guidelines, Sky Financial and Sky Bank must meet specific quantitative measures of their assets, liabilities and certain off-balance sheet items as determined under regulatory accounting practices. Sky
Financials and Sky Banks capital amounts and classifications are subject to qualitative judgments by the regulators about components, risk weighting and other factors.



Management believes, as of December 31, 2004, Sky Financial and Sky Bank meet all capital adequacy requirements for which
they are subject. At December 31, 2004, Sky Financials and Sky Banks ratio of total capital to risk-weighted assets as defined by the regulatory framework for prompt corrective action were 11.7% and 10.8%. The capital position is managed
through changes to balance sheet size and composition, issuance of debt and equity instruments, treasury stock activities, dividend policies and retention of earnings.



Sky Financials strategic plans include continued growth through acquisitions, which can potentially impact Sky
Financials capital position. Sky Financial may issue additional common stock in conjunction with future acquisitions in order maintain its well capitalized status.



In September 2004, Sky Financials Board of Directors authorized the repurchase of up to 2,068 shares of common stock.
During 2004 Sky Financial repurchased 68 shares under the current authorization and in 2005 expects to repurchase the remaining shares authorized. In 2002, Sky Financial repurchased 784 shares under a previous authorization. Shares repurchased by
Sky Financial were used in its stock option plans and for general corporate purposes.



As of December 31, 2004, Sky Financial has $189,558 of capital securities with wholly-owned unconsolidated subsidiaries, which are considered to be Tier I capital for regulatory purposes.



Under the current Federal Reserve Boards regulatory framework, certain
capital securities offered by wholly-owned uncon-solidated trust preferred entities of Sky Financial are included as Tier I regulatory capital. The Federal Reserve Board is currently evaluating whether these capital securities continue
as Tier I capital as a result of deconsolidating the related trust preferred entities in accordance with generally accepted accounting principals. If the Federal Reserve Board disallows the capital securities as Tier I regulatory capital, the effect
of such a change could have a material impact on Sky Financials regulatory ratios.



Market Risk Management



Market risk is
the risk that a financial institutions earnings and capital, or its ability to meet its business objectives, will be adversely affected by movements in market rates or prices such as interest rates, foreign exchange rates, equity prices,
credit spreads and/or commodity prices. Within Sky Financial, the dominant market risk exposure is changes in interest rates. The negative effect of this exposure is felt through the net interest spread, mortgage banking revenues and the market
values of various assets and liabilities.



Sky Financial
manages market risk through its ALCO at both the subsidiary and consolidated levels. The committee assesses interest rate risk exposure through three primary measurements: rate sensitive assets divided by rate sensitive liabilities (or Gap
ratios), interest rate shock simulations of net interest income at risk and economic value of equity risk simulation.



Sky Financial also utilizes interest rate swaps and caps to effectively modify its liability interest rate repricing to more effectively match the
repricing characteristics of its assets. At December 31, 2004, the fair value of Sky Financials derivative arrangements aggregated $7,989 on contracts with notional amounts of $412,200. Sky Financial monitors and manages its rate sensitivity
position to maximize net interest income, while minimizing the risk due to changes in interest rates. One method Sky Financial uses to manage its interest rate risk is a rate sensitivity gap analysis.



The difference between a financial institutions interest rate sensitive
assets (i.e. assets that will mature or reprice within a specific time period) and interest rate sensitive liabilities (i.e. liabilities that will mature or reprice within the same time period) is commonly referred to as its interest rate
sensitivity gap or gap. An institution having more interest rate sensitive assets than interest rate sensitive liabilities within a given time



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##### Table of Contents

period is said to have a positive gap, which generally means that if interest rates increase, a companys net interest income will increase
and if interest rates decrease, its net interest income will decrease. An institution having more interest rate sensitive liabilities than interest rate assets within a given time period is said to have a negative gap, which generally
means that if interest rates increase, a companys net interest income will decrease and if interest rates decrease, its net interest income will increase.



The current policy imposes limits at the six-month and 12-month time periods that is measured in terms of the ratio of cumulative rate sensitive assets
divided by rate sensitive liabilities. Table 21 presents the gap position of Sky Financial at December 31, 2004 and 2003.



Table 21Gap Position



|          |  |               |   |     |               |   |     |                 |   |  |    |  
|--------- |  | ------------- | - | --- | ------------- | - | --- | --------------- | - |  | -- | -
|          |  | Year-end 2004 |   |     | Year-end 2003 |   |     | ALCO Guidelines |  
|          |  |               |   | Max |               |   | Min |                
|Six month |  | 108.2         | % |     | 105.5         | % |     | 125             | % |  | 95 | %
|One year  |  | 105.9         | % |     | 102.5         | % |     | 125             | % |  | 95 | %



The interest rate
shock simulation analysis measures the potential effect on earnings that an instantaneous parallel change in general interest rates could have on net interest income and economic value of equity. Sky Financial applies hypothetical interest rate
shocks up 300, 200 and 100 basis points and down 100 basis points to its financial instruments based on the assumed cash flows. Under the current interest rate environment, a declining 200 basis point or greater scenario is improbable and therefore
provide no meaningful results. The economic value of equity measures the price risk of the entire balance sheet by discounting expected cash flows of all assets and liabilities and netting the result. This provides a longer-term view of the interest
rate risk profile of the company that is focused on the current economic value of assets and liabilities that make up the balance sheet at a static point in time. The shock then examines how the economic value of the company would change if market
rates were different. As demonstrated in Table 22, as of December 31, 2004, the projected volatility of net interest income and economic value of equity due to the hypothetical changes in market rates are within ALCO guidelines. As a result of being
in a historically low rate environment, Sky Financial is monitoring the effect of a 300 basis point up scenario. A policy limit for a 300 basis point up scenario has not been proposed by management as of December 31, 2004.



Table 22Rate Shock Analysis



|                                    |  |               |    |  |               |    |  |                 |   
|----------------------------------- |  | ------------- | -- |  | ------------- | -- |  | --------------- | --
|                                    |  | Year-end 2004 |    |  | Year-end 2003 |    |  | ALCO Guidelines |   
|One year net interest-income change |  |               |    |  |               |    |  |                 |   
|+300 Basis points                   |  | 3.3           | %  |  | 1.4           | %  |  | N/A             |   
|+200 Basis points                   |  | 2.6           |    |  | 1.1           |    |  | (10.0           | )%
|+100 Basis points                   |  | 1.4           |    |  | 0.6           |    |  | (5.0            | ) 
|-100 Basis points                   |  | (2.3          | )  |  | (3.2          | )  |  | (5.0            | ) 
|                                    |  |               |   
|Net present value of equity change  |  |               |    |  |               |    |  |                 |   
|+300 Basis points                   |  | (14.6         | )% |  | (18.1         | )% |  | N/A             |   
|+200 Basis points                   |  | (8.7          | )  |  | (10.9         | )  |  | (15.0           | )%
|+100 Basis points                   |  | (3.8          | )  |  | (4.6          | )  |  | (10.0           | ) 
|-100 Basis points                   |  | 1.1           |    |  | 1.4           |    |  | (10.0           | ) 



The preceding analysis
is based on numerous assumptions, including relative levels of market interest rates, instantaneous and parallel shifts in the yield curve, loan prepayments and reactions of depositors to changes in interest rates, and should not be relied upon as
being indicative of actual or future results. Further, the analysis does not necessarily contemplate all actions Sky Financial may undertake in response to changes in interest rates.



Effects of Inflation



The assets and liabilities of Sky Financial are primarily monetary in nature and are more directly affected by the fluctuation in interest rates than inflation. Movement
in interest rates is a result of the perceived changes in inflation as well as monetary and fiscal policies. Interest rates and inflation do not necessarily move with the same velocity or within the same period; therefore, a direct relationship to
the inflation rate cannot be shown. The financial information presented in this report has been prepared in accordance with generally accepted accounting principles, which require that Sky Financial measure financial position and operating results
primarily in terms of historical dollars.



Pending Acquisition



On December 22, 2004, Sky Financial announced an agreement to acquire
Belmont Bancorp and its wholly-owned subsidiary, Belmont National Bank, a $297 million commercial bank. Under the terms of the agreement, shareholders of Belmont will receive cash, shares of Sky Financial, or a combination thereof, based upon an
election process to occur prior to closing. Cash consideration is valued at $6.15 per Belmont share and stock consideration is fixed at an exchange ratio of 0.219 shares of Sky Financial for each share of Belmont. The agreement further provides
that, in the aggregate, 72.5% of the Belmont shares will be exchanged for Sky Financial common stock, with the remainder of Belmont shares exchanged for cash. The transaction is valued at $69.2 million, based upon Sky Financials closing stock
price as of December 21, 2004 and is expected to close in the second quarter of 2005. The exchange is expected to qualify as a tax-free transaction to the Belmont Bancorp shareholders. Following the merger, and upon the receipt of all necessary
regulatory approvals, Belmont National Bank will be merged with and into Sky Bank.



Not considering the merger-related charges discussed below, the merger is expected to be accretive to diluted earnings per share for the year 2005 due to the expected cost savings benefits achieved through the
integration of systems and support functions, improved financial center efficiencies and increased alternative delivery channels for financial products and services. However, due to the second quarter completion date for the merger and the relative
size to Sky Financial, the accretive impact to diluted earnings per share is expected to be less than $.01 per share in 2005. As a result of cost savings efforts, Sky Financial expects to reduce approximately 40% of Belmont Bancorps
non-interest expense or $4 million on an annual basis and $2,300 during 2005 after the completion of the merger. After-tax merger related charges of approximately $1,000 or approximately $.01 per diluted share are expected to be recognized in the
second quarter of 2005.



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##### Table of Contents

Managements Discussion and Analysis of Financial Condition and Results of
Operation

(Dollars and shares in thousands, except per share data)



Critical Accounting Policies and Estimates



The accounting and reporting policies of Sky Financial are in accordance with accounting
principles generally accepted within the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for credit losses and mortgage servicing rights are deemed critical
because they involve the use of estimates and require significant management judgments. Application of assumptions different from those used by management could result in material changes in Sky Financials financial position or results of
operations.



Account- Allowance for
Credit Losses



Balance Sheet Reference- Allowance for Credit Losses



Income
Statement Reference- Provision for Credit Losses



Description



The allowance for credit losses is an amount that management believes
will be adequate to absorb probable incurred losses in existing loans taking into consideration such factors as past loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem
loans and current economic conditions that affect the borrowers ability to pay. Determination of the allowance is inherently subjective due to the aforementioned reasons. Loan losses are charged off against the allowance when management
believes that the full collectibility of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance. Allowances established to provide for losses under commitments to extend credit, or recourse provisions under
loan sales agreements or servicing agreements are classified with other liabilities.



A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. Residential mortgage, installment and other consumer loans are
collectively evaluated for impairment. Individual commercial loans exceeding size thresholds established by management are evaluated for impairment. Impaired loans are recorded at the loans fair value by the establishment of a specific
allowance where necessary. The fair value of collateral-dependent loans is determined by the fair value of the underlying collateral. The fair value of noncollateral-dependent loans is determined by discounting expected future interest and principal
payments at the loans effective interest rate.



Sky
Financial maintains the allowance for credit losses at a level adequate to absorb managements estimate of probable losses inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified
problem loans and an unallocated allowance, which represent estimations done pursuant to either Standard of Financial Accounting Standards (SFAS) No. 5 Accounting for Contingencies, or SFAS 114, Accounting by Creditors for
Impairment of a Loan.



The general allowance is
determined by applying estimated loss factors to the credit exposures from outstanding loans. For construction, commercial and commercial real estate loans loss factors are applied based on internal risk grades of these loans. Many factors are
considered when these grades are assigned to individual loans such as current and past delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends
affecting the portfolio. For residential real estate, installment, credit card and other loans, loss factors are applied on a portfolio basis. Loss factors are based on Sky Financials historical loss experience and are reviewed for
modification on a quarterly basis, along with other factors affecting the collectibility of the loan portfolio.



Specific allowances are established for all criticized and classified loans, where management has determined that, due to identified significant
conditions, it is probable that a loss has been incurred that exceeds the general allowance loss factor for those loans. The unallocated allowance recognizes the estimation risk associated with the allocated general and specific allowances and
incorporates managements evaluation of existing conditions that are not included in the allocated allowance determinations. These conditions are reviewed quarterly by management and include general economic conditions, credit quality trends
and internal loan review and regulatory examination findings.



Management believes that it uses the best information available to determine the adequacy of the allowance for loan losses. However, future adjustments to the allowance may be necessary and the results of operations could be significantly
and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.



Account- Mortgage Servicing Rights



Balance Sheet Reference - Other Assets



Income Statement Reference - Mortgage Banking Income



Description



The cost of mortgage loans sold or securitized is allocated between the mortgage servicing rights and the mortgage loans based on the relative fair values of each. The
fair value of the mortgage servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected
prepayment speeds and discount rates, about which management must make assumptions based on future expectations.



Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income. Management periodically evaluates
mortgage servicing rights for impairment by stratifying the loans in the servicing portfolio primarily based on loan type, interest rate and region of origination. Impairment is measured by estimating the fair value of each stratum, taking into
consideration the estimated level of prepayments based upon current industry expectations. An impairment allowance for a stratum is recorded when, and in an amount which, its fair value is less than its carrying value.



The value of mortgage servicing rights is subject to prepayment risk. Future
expected net cash flows from servicing a loan in our servicing portfolio will not be realized if the loan pays off earlier than anticipated. Moreover, because most loans within our servicing portfolio do not contain penalty provisions for early
payoff, we will not receive a corresponding economic benefit if the loan pays off earlier than expected. Mortgage servicing rights represent the discounted present value of the future net cash flows we expect to receive from our servicing portfolio.



28



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##### Table of Contents

Recent Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, which
revises SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. This Statement focuses primarily on accounting for transactions in which an entity
obtains employee services in share-based payment transactions. This Statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers Accounting for Stock
Ownership Plans. This Statement requires an entity to recognize the cost of employee services received in share-based payment transactions and measure the cost on a grant-date fair value of the award. That cost will be recognized over the
period during which an employee is required to provide service in exchange for the award. The provisions of SFAS No. 123 (revised 2004) will be effective for the Companys financial statements issued for periods beginning after June 15, 2005.
The methodology and timing of adoption has not yet been determined.



In March 2004, FASB ratified the consensus reached by the Emerging Issues Task Force in Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (EITF 03-1). EITF 03-1 provides
guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary and measurement of an impairment loss. In September 2004, the FASB issued FSP 03-1-1, which delayed the effective date for the measurement
and recognition guidance contained in paragraphs 1020 of Issue 03-1 due to additional proposed guidance. At December 31, 2004, gross unrealized losses on available for sale securities was $24,563. Sky Financial is continuing to evaluate the
impact of EITF 03-1. The amount of other-than-temporary impairment to be recognized, if any, will be dependent on market conditions, managements intent and ability to hold investments until a forecasted recovery, and the finalization of the
proposed guidance by the FASB.



Note 1 to the consolidated
financial statements discusses other new accounting pronouncements adopted by Sky Financial during 2004. There was no material impact on Sky Financial as a result of adopting these other accounting policies.



Forward Looking Statements



This report includes forward-looking statements by Sky Financial relating to such matters as
anticipated operating results, business line results, credit quality expectations, prospects for new lines of business, technological developments, economic trends (including interest rates), reorganization transactions and similar matters. Such
statements are based upon the current beliefs and expectations of Sky Financials management and are subject to risks and uncertainties. While Sky Financial believes that the assumptions underlying the forward-looking statements contained
herein are reasonable, any of the assumptions could prove to be inaccurate, and accordingly, actual results and experience could differ materially from the anticipated results or other expectations expressed by Sky Financial in its forward-looking
statements. Factors that could cause actual results or experience to differ from results discussed in the forward-looking statements include, but are not limited to: economic conditions; volatility and direction of market interest rates; loan
origination projections and operating results of SFS; governmental legislation and regulation, including changes in accounting regulation or standards; material unforeseen changes in the financial condition or results of operations of Sky
Financials clients; client reaction to and unforeseen complications with respect to Sky Financials integration of acquisitions; difficulties in realizing expected cost savings and revenue generation from acquisitions; and other risks
identified from time-to-time in Sky Financials other public documents on file with the Securities and Exchange Commission. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements, and the
purpose of this paragraph is to secure the use of the safe harbor provisions.



Item 7A. Quantitative and Qualitative Disclosures About Market Risk



The information contained under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations  Market Risk Management on page 26 of this Form 10-K is
incorporated herein by reference in response to this item.



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##### Table of Contents

Item 8. Financial Statements and Supplementary Data



Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders of

Sky Financial Group, Inc.

Bowling Green, Ohio



We have audited the
accompanying consolidated balance sheets of Sky Financial Group, Inc. and subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in shareholders equity, and cash
flows for the years then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The
financial statements of the Company for the year ended December 31, 2002 were audited by other auditors whose report, dated January 21, 2003, except for Note 26, as to which the date is July 2, 2004, expressed an unqualified opinion on those
statements and included an explanatory paragraph related to the adoption of new accounting guidance for goodwill and intangible assets in 2002.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.



In our opinion, such 2004 and 2003 consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.



We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Companys internal control over financial reporting as of December 31, 2004, based on the
criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2005 expressed an unqualified opinion on managements assessment
of the effectiveness of the Companys internal control over financial reporting and an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.



LOGO



Deloitte and Touche LLP

Cleveland, Ohio

February 16, 2005



30



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##### Table of Contents

Consolidated Balance Sheets

(Dollars and shares in thousands, except per share data)



|                                                                                                         |  |      |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|December 31,                                                                                             |  | 2004 |            |   | 2003 |  
|Assets                                                                                                   |  |      |            |   |      |   |            |  
|Cash and due from banks                                                                                  |  | $    | 232,407    |   |      | $ | 251,364    |  
|Interest-earning deposits with financial institutions                                                    |  |      | 32,919     |   |      |   | 22,808     |  
|Loans held for sale                                                                                      |  |      | 9,433      |   |      |   | 28,062     |  
|Securities available for sale                                                                            |  |      | 3,091,813  |   |      |   | 2,511,369  |  
|                                                                                                         |  |     
|Total loans                                                                                              |  |      | 10,616,118 |   |      |   | 8,644,645  |  
|Less allowance for credit losses                                                                         |  |      | (151,389   | ) |      |   | (124,943   | )
|                                                                                                         |  |      |            |   |      |   |            |  
|Net loans                                                                                                |  |      | 10,464,729 |   |      |   | 8,519,702  |  
|                                                                                                         |  |     
|Premises and equipment, net                                                                              |  |      | 155,466    |   |      |   | 153,285    |  
|Goodwill                                                                                                 |  |      | 475,258    |   |      |   | 185,859    |  
|Core deposit and other intangibles, net                                                                  |  |      | 71,674     |   |      |   | 51,155     |  
|Assets of discontinued operations                                                                        |  |      |            |   |      |   | 874,765    |  
|Accrued interest receivable and other assets                                                             |  |      | 410,724    |   |      |   | 348,609    |  
|                                                                                                         |  |      |            |   |      |   |            |  
|Total assets                                                                                             |  | $    | 14,944,423 |   |      | $ | 12,946,978 |  
|                                                                                                         |  |      |            |   |      |   |            |  
|Liabilities                                                                                              |  |      |            |   |      |   |            |  
|Deposits                                                                                                 |  |      |            |   |      |   |            |  
|Non-interest-bearing deposits                                                                            |  | $    | 1,592,510  |   |      | $ | 1,233,272  |  
|Interest-bearing deposits                                                                                |  |      | 8,759,081  |   |      |   | 7,282,261  |  
|                                                                                                         |  |      |            |   |      |   |            |  
|Total deposits                                                                                           |  |      | 10,351,591 |   |      |   | 8,515,533  |  
|Securities sold under repurchase agreements and federal funds purchased                                  |  |      | 1,041,361  |   |      |   | 994,896    |  
|Debt and Federal Home Loan Bank advances                                                                 |  |      | 1,735,282  |   |      |   | 1,311,758  |  
|Junior subordinated debentures owed to unconsolidated subsidiary trusts                                  |  |      | 189,558    |   |      |   | 164,806    |  
|Liabilities of discontinued operations                                                                   |  |      |            |   |      |   | 822,498    |  
|Accrued interest payable and other liabilities                                                           |  |      | 155,676    |   |      |   | 138,911    |  
|                                                                                                         |  |      |            |   |      |   |            |  
|Total liabilities                                                                                        |  | $    | 13,473,468 |   |      | $ | 11,948,402 |  
|                                                                                                         |  |      |            |   |      |   |            |  
|Shareholders Equity                                                                                     |  |      |            |   |      |   |            |  
|Common stock, no par value; 350,000 shares authorized; 106,952 and 92,485 shares issued in 2004 and 2003 |  |      | 1,136,681  |   |      |   | 764,860    |  
|Retained earnings                                                                                        |  |      | 343,541    |   |      |   | 234,000    |  
|Treasury stock; 113 and 42 shares in 2004 and 2003                                                       |  |      | (2,330     | ) |      |   | (742       | )
|Accumulated other comprehensive income (loss)                                                            |  |      | (6,937     | ) |      |   | 458        |  
|                                                                                                         |  |      |            |   |      |   |            |  
|Total shareholders equity                                                                               |  |      | 1,470,955  |   |      |   | 998,576    |  
|                                                                                                         |  |      |            |   |      |   |            |  
|Total liabilities and shareholders equity                                                               |  | $    | 14,944,423 |   |      | $ | 12,946,978 |  
|                                                                                                         |  |      |            |   |      |   |            |  



The accompanying notes are an integral
part of the financial statements.



31



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##### Table of Contents

Consolidated Statements of Income

(Dollars in thousands, except per share data)



|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | -
|For The Years Ended December 31,                                                                      |  | 2004 |         | 2003 |   | 2002    | 
|Interest Income                                                                                       |  |      |         |      |   |         |  |   |         |  
|Loans, including fees                                                                                 |  | $    | 543,085 |      | $ | 493,047 |  | $ | 459,526 |  
|Securities                                                                                            |  |      |         |      |   |         |  |   |         |  
|Taxable                                                                                               |  |      | 118,035 |      |   | 99,998  |  |   | 115,261 |  
|Nontaxable                                                                                            |  |      | 321     |      |   | 653     |  |   | 1,248   |  
|Federal funds sold and other                                                                          |  |      | 502     |      |   | 365     |  |   | 362     |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Total interest income                                                                                 |  |      | 661,943 |      |   | 594,063 |  |   | 576,397 |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Interest Expense                                                                                      |  |      |         |      |   |         |  |   |         |  
|Deposits                                                                                              |  |      | 141,764 |      |   | 143,205 |  |   | 176,265 |  
|Borrowed funds                                                                                        |  |      | 68,868  |      |   | 59,615  |  |   | 58,897  |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Total interest expense                                                                                |  |      | 210,632 |      |   | 202,820 |  |   | 235,162 |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Net interest income                                                                                   |  |      | 451,311 |      |   | 391,243 |  |   | 341,235 |  
|Provision for credit losses                                                                           |  |      | 37,660  |      |   | 34,125  |  |   | 37,659  |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Net interest income after provision for credit losses                                                 |  |      | 413,651 |      |   | 357,118 |  |   | 303,576 |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Non-Interest Income                                                                                   |  |      |         |      |   |         |  |   |         |  
|Trust services income                                                                                 |  |      | 18,281  |      |   | 14,348  |  |   | 13,479  |  
|Service charges and fees on deposit accounts                                                          |  |      | 47,964  |      |   | 38,207  |  |   | 34,499  |  
|Mortgage banking income                                                                               |  |      | 24,844  |      |   | 47,832  |  |   | 28,626  |  
|Brokerage and insurance commissions                                                                   |  |      | 55,820  |      |   | 42,686  |  |   | 36,848  |  
|Net securities gains                                                                                  |  |      | 14,569  |      |   | 871     |  |   | 2,479   |  
|Other income                                                                                          |  |      | 41,939  |      |   | 34,954  |  |   | 32,053  |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Total non-interest income                                                                             |  |      | 203,417 |      |   | 178,898 |  |   | 147,984 |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Non-Interest Expenses                                                                                 |  |      |         |      |   |         |  |   |         |  
|Salaries and employee benefits                                                                        |  |      | 193,611 |      |   | 165,363 |  |   | 140,420 |  
|Occupancy and equipment expense                                                                       |  |      | 59,096  |      |   | 50,025  |  |   | 38,550  |  
|Merger, integration and restructuring expense                                                         |  |      | 4,542   |      |   | 4,577   |  |   | 10,437  |  
|Amortization expense                                                                                  |  |      | 10,979  |      |   | 6,896   |  |   | 4,033   |  
|Other operating expense                                                                               |  |      | 88,296  |      |   | 80,325  |  |   | 60,260  |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Total non-interest expenses                                                                           |  |      | 356,524 |      |   | 307,186 |  |   | 253,700 |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Income from continuing operations before income taxes                                                 |  |      | 260,544 |      |   | 228,830 |  |   | 197,860 |  
|Income taxes                                                                                          |  |      | 85,344  |      |   | 76,150  |  |   | 65,712  |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Income from continuing operations                                                                     |  |      | 175,200 |      |   | 152,680 |  |   | 132,148 |  
|Income (loss) from discontinued operations (net of tax of $10,348, $2,305 and ($2,345), respectively) |  |      | 19,155  |      |   | 3,937   |  |   | (4,341  | )
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Net Income                                                                                            |  | $    | 194,355 |      | $ | 156,617 |  | $ | 127,807 |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Basic Earnings (Loss) Per Common Share                                                                |  |      |         |      |   |         |  |   |         |  
|Income from continuing operations                                                                     |  | $    | 1.76    |      | $ | 1.70    |  | $ | 1.58    |  
|Income (loss) from discontinued operations                                                            |  |      | 0.19    |      |   | 0.05    |  |   | (0.05   | )
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Net Income                                                                                            |  | $    | 1.95    |      | $ | 1.75    |  | $ | 1.53    |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Diluted Earnings (Loss) Per Common Share                                                              |  |      |         |      |   |         |  |   |         |  
|Income from continuing operations                                                                     |  | $    | 1.74    |      | $ | 1.69    |  | $ | 1.57    |  
|Income (loss) from discontinued operations                                                            |  |      | 0.19    |      |   | 0.04    |  |   | (0.05   | )
|                                                                                                      |  |      |         |      |   |         |  |   |         |  
|Net Income                                                                                            |  | $    | 1.93    |      | $ | 1.73    |  | $ | 1.52    |  
|                                                                                                      |  |      |         |      |   |         |  |   |         |  



The accompanying notes are an integral
part of the financial statements.



32



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##### Table of Contents

Consolidated Statements of Changes in Shareholders Equity

(Dollars and shares in thousands, except per share data)



|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|--------------------------------------------------------------- |  | ------------ |  | --------------- | - |  | ------------ | --------- | - | ----------------- | - | ------- | -------------- |  | - | ------------- | - |  | --------------------------------------------- | ---- | - | ----- | - | ------- | - |  | - | --------- | -
|                                                                |  | CommonShares |  | Treasury Shares |   |  | Common Stock |           |   | Retained Earnings |   |         | Treasury Stock |  |   | Unearned ESOP |   |  | Accumulated Other Comprehensive Income (Loss) |      |   | Total |  
|Balance, December 31, 2001                                      |  | 84,011       |  | 2,164           |   |  | $            | 596,397   |   |                   | $ | 86,113  |                |  | $ | (39,505       | ) |  | $                                             | (123 | ) |       | $ | 5,562   |   |  | $ | 648,444   |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Comprehensive income                                            |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Net income                                                      |  |              |  |                 |   |  |              |           |   |                   |   | 127,807 |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 127,807   |  
|Other comprehensive income                                      |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   | 22,526  |   |  |   | 22,526    |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Total comprehensive income                                      |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 150,333   |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Cash dividends ($.77 per share)                                 |  |              |  |                 |   |  |              |           |   |                   |   | (64,459 | )              |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | (64,459   | )
|Treasury shares acquired                                        |  |              |  | 784             |   |  |              |           |   |                   |   |         |                |  |   | (16,403       | ) |  |                                               |      |   |       |   |         |   |  |   | (16,403   | )
|Treasury shares issued for stock option exercises               |  |              |  | (335            | ) |  |              | (3,253    | ) |                   |   |         |                |  |   | 6,998         |   |  |                                               |      |   |       |   |         |   |  |   | 3,745     |  
|Shares issued for stock option exercises                        |  | 33           |  |                 |   |  |              | 498       |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 498       |  
|Shares issued to acquire Three Rivers Bancorp                   |  | 3,222        |  | (1,632          | ) |  |              | 63,667    |   |                   |   |         |                |  |   | 31,160        |   |  |                                               |      |   |       |   |         |   |  |   | 94,827    |  
|Shares issued to acquire Celaris Group, Inc.                    |  |              |  | (748            | ) |  |              | 1,564     |   |                   |   |         |                |  |   | 13,785        |   |  |                                               |      |   |       |   |         |   |  |   | 15,349    |  
|Fractional shares and other items                               |  | 11           |  | (12             | ) |  |              | (106      | ) |                   |   | 82      |                |  |   |               |   |  |                                               | 123  |   |       |   |         |   |  |   | 99        |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Balance, December 31, 2002                                      |  | 87,277       |  | 221             |   |  |              | 658,767   |   |                   |   | 149,543 |                |  |   | (3,965        | ) |  |                                               |     |   |       |   | 28,088  |   |  |   | 832,433   |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Comprehensive income                                            |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Net income                                                      |  |              |  |                 |   |  |              |           |   |                   |   | 156,617 |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 156,617   |  
|Other comprehensive loss                                        |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   | (27,630 | ) |  |   | (27,630   | )
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Total comprehensive income                                      |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 128,987   |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Cash dividends ($.81 per share)                                 |  |              |  |                 |   |  |              |           |   |                   |   | (72,968 | )              |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | (72,968   | )
|Shares issued for stock option exercises                        |  | 604          |  |                 |   |  |              | 10,869    |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 10,869    |  
|Shares issued to acquire Metropolitan Financial Corp            |  | 2,887        |  |                 |   |  |              | 55,294    |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 55,294    |  
|Shares issued to acquire Great Lakes Bancorp                    |  | 1,717        |  |                 |   |  |              | 39,195    |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 39,195    |  
|Shares issued to acquire Insurance Buyers Services Agency, Inc. |  |              |  | (164            | ) |  |              | 735       |   |                   |   |         |                |  |   | 2,963         |   |  |                                               |      |   |       |   |         |   |  |   | 3,698     |  
|Fractional shares and other items                               |  |              |  | (15             | ) |  |              |           |   |                   |   | 808     |                |  |   | 260           |   |  |                                               |      |   |       |   |         |   |  |   | 1,068     |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Balance, December 31, 2003                                      |  | 92,485       |  | 42              |   |  |              | 764,860   |   |                   |   | 234,000 |                |  |   | (742          | ) |  |                                               |     |   |       |   | 458     |   |  |   | 998,576   |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Comprehensive income                                            |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Net income                                                      |  |              |  |                 |   |  |              |           |   |                   |   | 194,355 |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 194,355   |  
|Other comprehensive loss                                        |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   | (7,395  | ) |  |   | (7,395    | )
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Total comprehensive income                                      |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 186,960   |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Cash dividends ($.85 per share)                                 |  |              |  |                 |   |  |              |           |   |                   |   | (84,814 | )              |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | (84,814   | )
|Treasury shares acquired                                        |  |              |  | 68              |   |  |              |           |   |                   |   |         |                |  |   | (1,588        | ) |  |                                               |      |   |       |   |         |   |  |   | (1,588    | )
|Shares issued for stock option exercises                        |  | 872          |  |                 |   |  |              | 19,929    |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 19,929    |  
|Shares issued to acquire EOB, Inc.                              |  | 177          |  |                 |   |  |              | 4,558     |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 4,558     |  
|Shares issued to acquire Second Bancorp                         |  | 11,953       |  |                 |   |  |              | 310,645   |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 310,645   |  
|Shares issued to acquire Spencer Patterson Insurance Agency     |  | 297          |  |                 |   |  |              | 7,637     |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 7,637     |  
|Shares issued to acquire Prospect Bancshares                    |  | 1,139        |  |                 |   |  |              | 29,052    |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   | 29,052    |  
|Fractional shares and other items                               |  | 29           |  | 3               |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |          |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  
|Balance, December 31, 2004                                      |  | 106,952      |  | 113             |   |  | $            | 1,136,681 |   |                   | $ | 343,541 |                |  | $ | (2,330        | ) |  | $                                             |     |   |       | $ | (6,937  | ) |  | $ | 1,470,955 |  
|                                                                |  |              |  |                 |   |  |              |           |   |                   |   |         |                |  |   |               |   |  |                                               |      |   |       |   |         |   |  |   |           |  



The accompanying notes are an integral
part of the financial statements.





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Consolidated Statements of Cash Flows

(Dollars in thousands)



|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|For The Years Ended December 31,                                                                  |  | 2004 |            |   | 2003 |   |            | 2002 | 
|Operating Activities                                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Income from continuing operations                                                                 |  | $    | 175,200    |   |      | $ | 152,680    |      |  | $ | 132,148    |  
|Adjustments to reconcile income from continuing operations to net cash from operating activities: |  |      |            |   |      |   |            |      |  |   |            |  
|Depreciation, amortization and accretion                                                          |  |      | 22,663     |   |      |   | 30,614     |      |  |   | 26,791     |  
|Net gains on sales of assets                                                                      |  |      | (14,751    | ) |      |   | (721       | )    |  |   | (2,339     | )
|Provision for credit losses                                                                       |  |      | 37,660     |   |      |   | 34,125     |      |  |   | 37,659     |  
|Proceeds from sales of loans held for sale                                                        |  |      | 1,128,777  |   |      |   | 2,265,681  |      |  |   | 1,609,975  |  
|Disbursements on originations of loans held for sale                                              |  |      | (1,110,148 | ) |      |   | (2,190,064 | )    |  |   | (1,624,672 | )
|Net change in other assets and liabilities                                                        |  |      | 635        |   |      |   | (68,797    | )    |  |   | (28,482    | )
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided from operating activities of continuing operations                              |  |      | 240,036    |   |      |   | 223,518    |      |  |   | 151,080    |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash (used for) provided from operating activities of discontinued operations                 |  |      | (3,560     | ) |      |   | 46,867     |      |  |   | 23,808     |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Investing Activities                                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Net (decrease) increase in interest-earning deposits with financial institutions                  |  |      | (3,232     | ) |      |   | 12,726     |      |  |   | (16,366    | )
|Net decrease (increase) in federal funds sold                                                     |  |      |            |   |      |   | 44,860     |      |  |   | (3,100     | )
|Securities available for sale:                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Proceeds from maturities and payments                                                             |  |      | 754,932    |   |      |   | 1,499,132  |      |  |   | 1,028,862  |  
|Proceeds from sales                                                                               |  |      | 225,923    |   |      |   | 416,526    |      |  |   | 423,106    |  
|Purchases                                                                                         |  |      | (1,052,584 | ) |      |   | (2,051,780 | )    |  |   | (1,315,494 | )
|Proceeds from sales of non-mortgage loans                                                         |  |      | 99,115     |   |      |   | 25,344     |      |  |   | 22,980     |  
|Net increase in loans                                                                             |  |      | (608,005   | ) |      |   | (235,529   | )    |  |   | (595,071   | )
|Purchases of premises and equipment                                                               |  |      | (20,401    | ) |      |   | (19,032    | )    |  |   | (28,361    | )
|Proceeds from sales of premises and equipment                                                     |  |      | 20,053     |   |      |   | 22,634     |      |  |   | 4,104      |  
|Proceeds from sales of other real estate                                                          |  |      | 12,975     |   |      |   | 4,111      |      |  |   | 1,608      |  
|Proceeds from sale of discontinued operations, net of cash sold                                   |  |      | 68,207     |   |      |   |            |      |  |   |            |  
|Net cash received (paid) in acquisitions                                                          |  |      | 23,170     |   |      |   | 58,721     |      |  |   | (10,239    | )
|Other items                                                                                       |  |      |            |   |      |   | (154       | )    |  |   | 851        |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash used for investing activities of continuing operations                                   |  |      | (479,847   | ) |      |   | (222,441   | )    |  |   | (487,120   | )
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash used for investing activities of discontinued operations                                 |  |      | (26,126    | ) |      |   | (264,871   | )    |  |   | (259,475   | )
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Financing Activities                                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in deposit accounts                                                       |  |      | 336,125    |   |      |   | (231,892   | )    |  |   | 303,935    |  
|Net (decrease) increase in federal funds and repurchase agreements                                |  |      | (49,874    | ) |      |   | 150,180    |      |  |   | 109,675    |  
|Net (decrease) increase in short-term FHLB advances                                               |  |      | (106,500   | ) |      |   | 280,000    |      |  |   | 180,000    |  
|Net decrease in borrowings under bank lines of credit                                             |  |      | (61,000    | ) |      |   | (4,000     | )    |  |   | (13,000    | )
|Proceeds from trust preferred securities/junior subordinated debt                                 |  |      |            |   |      |   | 30,000     |      |  |   |            |  
|Repayment of trust preferred securities/junior subordinated debt                                  |  |      | (16,000    | ) |      |   | (27,750    | )    |  |   |            |  
|Proceeds from issuance of debt and long-term FHLB advances                                        |  |      | 265,723    |   |      |   | 54,590     |      |  |   | 190,000    |  
|Repayment of debt and long-term FHLB advances                                                     |  |      | (100,087   | ) |      |   | (180,359   | )    |  |   | (372,773   | )
|Cash dividends and fractional shares paid                                                         |  |      | (80,731    | ) |      |   | (71,008    | )    |  |   | (62,631    | )
|Proceeds from issuance of common stock                                                            |  |      | 19,929     |   |      |   | 10,869     |      |  |   | 4,243      |  
|Treasury stock purchases                                                                          |  |      | (1,588     | ) |      |   |            |      |  |   | (16,403    | )
|Other items                                                                                       |  |      |            |   |      |   | 1,068      |      |  |   |            |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided from financing activities of continuing operations                              |  |      | 205,997    |   |      |   | 11,698     |      |  |   | 323,046    |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided from financing activities of discontinued operations                            |  |      | 31,129     |   |      |   | 216,835    |      |  |   | 229,637    |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net (decrease) increase in cash and due from banks                                                |  |      | (32,371    | ) |      |   | 11,606     |      |  |   | (19,024    | )
|Cash and due from banks at beginning of year                                                      |  |      | 264,778    |   |      |   | 253,172    |      |  |   | 272,196    |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Cash and due from banks at end of year                                                            |  |      | 232,407    |   |      |   | 264,778    |      |  |   | 253,172    |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Less cash at discontinued operations                                                              |  |      |           |   |      |   | (13,414    | )    |  |   | (13,205    | )
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Cash and due from banks at end of year, net of discontinued operations                            |  | $    | 232,407    |   |      | $ | 251,364    |      |  | $ | 239,967    |  
|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Supplemental Disclosures                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Interest paid                                                                                     |  | $    | 206,023    |   |      | $ | 242,765    |      |  | $ | 257,604    |  
|Income taxes paid                                                                                 |  |      | 70,220     |   |      |   | 86,138     |      |  |   | 62,981     |  
|Value of shares issued for acquisitions                                                           |  |      | 351,892    |   |      |   | 98,187     |      |  |   | 110,176    |  
|Transfer of loans to other real estate                                                            |  |      | 11,172     |   |      |   | 6,848      |      |  |   | 3,674      |  



Non-cash activity related to the
acquisitions included the purchase of assets with a fair value of $2,494,497 and the assumption of liabilities of $2,135,005 in 2004; the purchase of assets with a fair value of $1,625,525 and the assumption of liabilities of $1,500,968 in 2003; and
the purchase of assets with a fair value of $1,090,924 and the assumption of liabilities of $954,298 in 2002.



The accompanying notes are an integral part of the financial statements.





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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share
data)



Note 1 Summary of Significant Accounting Policies



Sky Financial Group, Inc. (Sky Financial) is a financial holding company headquartered in
Bowling Green, Ohio that owns and operates Sky Bank, which is primarily engaged in the commercial and consumer banking business in Ohio, Pennsylvania, Indiana, Michigan and West Virginia. Sky Financial also operates businesses relating to insurance,
brokerage, trust and other financial-related services.



Basis of
Presentation



The accounting and reporting policies followed by Sky
Financial conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and to general practices within the financial services industry. The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit
losses, fair values of financial instruments and mortgage servicing rights and status of contingencies are particularly subject to change.



Consolidation



The consolidated financial statements of Sky Financial include the accounts of Sky Bank, Sky Financial Solutions, Inc. (SFS), Sky Trust, N.A. (Sky Trust), Sky Insurance, Inc. (Sky Insurance), Meyer & Eckenrode
Insurance Group, Inc. (Meyer & Eckenrode), and various other insignificant subsidiaries. SFS was sold on March 31, 2004, and is included in the consolidated financial statements and related notes as discontinued operations. All significant
intercompany transactions and accounts have been eliminated in consolidation.



Securities



Sky Financial classifies its securities as held to
maturity, trading or available for sale. Securities classified as available for sale are those that management intends to sell or that could be sold for liquidity, investment management or similar reasons, even if there is not a present intention to
make such a sale. Equity securities that have a readily determinable fair value are also classified as available for sale. Securities classified as available for sale are carried at estimated fair value with unrealized appreciation or depreciation
recorded, net of tax, in other comprehensive income. Securities classified as held to maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts. Securities classified as held to maturity are those that management
has the positive intent and ability to hold to maturity. Trading securities are acquired for sale in the near term and are carried at fair value, with unrealized holding gains and losses reflected in earnings. Sky Financial held no trading
securities or securities classified as held to maturity during any period presented. Certain restricted equity securities, such as stock of the Federal Home Loan Bank of Cincinnati, are carried at cost. Amortization of premiums and accretion of
discounts are recorded in interest income using the interest method over the period to maturity, which is sometimes estimated. Gains and losses on security sales are calculated using the specific identification method to determine the
securitys cost. Purchases and sales of securities are recognized on a trade-date basis.



Derivative Financial Instruments



Sky
Financials hedging policies permit the use of interest rate swaps, caps and floors to manage interest rate risk or to hedge specified assets and liabilities. Sky Financial does not use derivative financial instruments for trading purposes.
Interest rate swaps were entered into as cash flow and fair value hedges for the purpose of modifying the interest rate characteristics of certain borrowings. The interest rate swaps involve no exchange of principal either at inception or upon
maturity; rather, it involves the periodic exchange of interest payments arising from an underlying notional value. Interest rate caps were entered into as cash flow hedges for purposes of modifying the interest rate characteristics of federal funds
purchased.



Derivative instruments are recorded at their fair
values. If derivative instruments are designated as hedges of fair values, both the change in the fair value of the hedge and the hedged item are included in current earnings. Fair value adjustments related to cash flow hedges are recorded in other
comprehensive income (loss), net of tax and reclassified to earnings when the hedged transaction is reflected in earnings. Ineffective portions of hedges are reflected in earnings as they occur.



Loans



Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are carried at the
outstanding principal amount, net of any loan origination and commitment fees and costs, and any premiums or discounts arising at the time of purchase or business acquisition. Interest is recorded when earned and includes amortization of any
deferred loan origination fees, commitment fees, costs, premiums and discounts. When collection of the loan or interest becomes doubtful, the loan is placed on nonaccrual status and all accrued and unpaid interest relating to previous years is
reversed and charged against the allowance for credit losses. Current years accrued and unpaid interest is reversed against interest income. Payments on nonaccrual loans are recorded as principal reductions until repayment of the loan and
interest is reasonably assured and the loan is returned to accrual status. Loan origination and commitment fees and premium and discounts are amortized over the contractual life of the loan as an adjustment to the related loans yield using the
interest method.



Loans Held for Sale



Certain residential mortgage loans are originated for sale in the secondary mortgage loan
market. Additionally, certain other loans are periodically identified to be sold. These loans are classified as loans held for sale and carried at the lower of cost or estimated fair value. Fair value is determined on the basis of rates quoted in
the respective secondary market for the type of loan held for sale. Loans are generally sold at a premium or discount from the carrying amount of the loans. Such premium or discount is recognized at the date of sale. Fixed commitments may be used at
the time loans are originated or identified for sale to mitigate interest rate risk. The fair value of fixed commitments to originate and sell loans held for sale was not material.



Mortgage Servicing Rights



Mortgage servicing rights (MSRs) are stated at cost less accumulated amortization. The cost of mortgage loans sold or securitized is allocated between the mortgage
servicing rights and the cost of the mortgage based on the relative fair values of each. The fair value of the mortgage servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash
flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates, about which management must make assumptions based on future expectations.





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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 1Summary of Significant Accounting Policies (continued)



MSRs are amortized in proportion to, and over the period of, estimated net servicing income. Management periodically
evaluates MSRs for impairment by stratifying the loans in the servicing portfolio primarily based on loan type, coupon rate and region. Impairment is measured by estimating the fair value of each stratum, taking into consideration the estimated
level of prepayments based upon current market expectations. An impairment allowance for a stratum is recorded when its fair value is less than its carrying value, and the impairment is deemed by management to be temporary. Amortization and
impairments are charged to mortgage banking income. Recoveries of impairment reduce the allowance and increase income.



MSRs are also reviewed for other-than-temporary impairment. Other-than-temporary impairment exists when the recoverability of a recorded valuation
allowance is determined to be remote taking into consideration historical and projected interest rates and loan pay-off activity. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-down to
the carrying value of the MSRs. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSR and the valuation allowance, precluding subsequent recoveries.



Allowance for Credit Losses



The allowance for credit losses is an amount that management believes will be adequate to
absorb probable incurred losses in existing loans taking into consideration such factors as past loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem loans and current
economic conditions that affect the borrowers ability to pay. Determination of the allowance is inherently subjective due to the aforementioned reasons. Changes in estimates are recorded currently through provision for credit losses. Loan
losses are charged off against the allowance when management believes that the full collectibility of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance. Allowances established to provide for losses
under commitments to extend credit or recourse provisions under loan sales agreements or servicing agreements are classified within other liabilities.



A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract.
Residential mortgage, installment and other consumer loans are evaluated by portfolio for impairment. Individual commercial loans exceeding size thresholds established by management are evaluated for impairment, while the balance of the portfolio is
evaluated collectively. Impaired loans are recorded at the loans fair value by the establishment of a specific allowance where necessary. The fair value of collateral-dependent loans is generally determined by the fair value of the underlying
collateral. The fair value of noncollateral-dependent loans is determined by discounting expected future interest and principal payments at the loans effective interest rate.



Sky Financial maintains the allowance for credit losses at a level adequate to absorb managements estimate of probable
losses inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance representing estimations done pursuant to either Standard of Financial
Accounting Standards (SFAS) No. 5 Accounting for Contingencies, or SFAS No. 114, Accounting by Creditors for Impairment of a Loan.



The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For construction, commercial and
commercial real estate loans, loss factors are applied based on internal risk grades of these loans. Many factors are considered when these grades are assigned to individual loans such as current and past delinquency, financial statements of the
borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. For residential real estate, installment, credit card and other loans, loss factors are applied on a
portfolio basis. Loss factors are based on Sky Financials historical loss experience and are reviewed for modification on a quarterly basis, along with other factors affecting the collectibility of the loan portfolio.



Specific allowances are established for all loans that are considered special
mention, substandard or doubtful in accordance with internal and regulatory guidelines where management has determined that, due to identified significant conditions, it is probable that a loss has been incurred that exceeds the general allowance
loss factor for those loans. The unallocated allowance recognizes the estimation risk associated with the allocated general and specific allowances and incorporates managements evaluation of existing conditions that are not included in the
allocated allowance determinations. These conditions are reviewed quarterly by management and include general economic conditions, credit quality trends and internal loan review and regulatory examination findings.



Foreclosed Assets



Assets acquired through or instead of loan foreclosure are initially recorded in other assets at the lower of the loan balance or fair value
less estimated selling costs when acquired, establishing a new cost basis. If fair value declines, a valuation allowance is recorded through expense. Costs related to the development and improvement of foreclosed assets are capitalized. Costs
related to holding and maintaining the property are charged to expense.



Premises and Equipment



Premises and equipment are stated at
cost less accumulated depreciation, which is computed primarily using the straight-line method over the estimated useful life of the owned asset and, for leasehold improvements, over the lesser of the remaining term of the lease facility or the
estimated economic life of the improvement. The useful lives range from 3 to 10 years for equipment, furniture and fixtures and 10 to 40 years for buildings and improvements. Maintenance and repairs are charged to expense as incurred, while major
improvements are capitalized and amortized to operating expense over the identified useful life. The adjusted cost of the specific assets sold or disposed of is used to compute gains or losses on disposal. These assets are reviewed for impairment
when events indicate their carrying value may not be recoverable. If management determines an impairment exists, the asset is reduced with an offsetting charge to expense.



Bank-Owned Life Insurance



Sky Financial has purchased life insurance polices on certain key employees. These policies are recorded in other assets at their cash surrender value, or the amount that
can be realized. Income from these policies and changes in the cash surrender value are recorded in other income.



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Resell and Repurchase Agreements



Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally treated as collateralized
financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The fair value of collateral either received from or provided to a third party is continually monitored and additional
collateral is obtained or is requested to be returned to Sky Financial as deemed appropriate.



Intangible Assets



Core deposit
intangible assets are amortized on an accelerated basis over their estimated useful lives, which average 7 to 12 years. Prior to January 1, 2002, goodwill was amortized using the straight-line method over periods ranging from 15 to 25 years.
Beginning in 2002, the Company ceased amortizing goodwill in accordance with a new accounting pronouncement. Goodwill is reviewed for impairment on an annual basis.



Merger, Integration and Restructuring Expense



Merger, integration and restructuring expenses primarily represent professional fees, severance and other personnel related costs, lease
terminations, valuation adjustments for certain premises, equipment and other assets and integration costs related to mergers, acquisitions and corporate restructuring. (See Note 16.)



Income Taxes



Sky Financial utilizes an asset and liability approach for financial accounting and reporting of income taxes. The provision for income taxes is the sum of taxes
currently payable and the change in deferred tax assets and liabilities, net of amounts recorded through acquisitions and amounts recorded in accumulated other comprehensive income. Deferred income taxes are provided using the current tax rate for
differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes.



Stock Dividends and Treasury Stock



Shares of Sky Financial stock may be acquired for reissuance in connection with stock option plans, for stock dividend declarations and for general corporate purposes.
The treasury shares acquired are recorded at cost. The fair value of shares issued in stock dividends is transferred from retained earnings to common stock, to the extent of available retained earnings. Any excess of fair value over available
retained earnings is considered a return of capital and thus is transferred from paid-in capital.



Stock-Based Compensation



Employee
compensation expense under stock option plans is reported under the intrinsic value method. No stock-based compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market price of the
underlying common stock at grant date. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of SFAS No. 123 Accounting for Stock Options.



|                                                                                                                           |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                           |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Net income as reported                                                                                                     |  | $    | 194,355 |   |      | $ | 156,617 |      |  | $ | 127,807 |  
|Deduct: total stock-based compensation expense determined under fair-value-based method for all awards, net of tax benefit |  |      | (3,514  | ) |      |   | (2,403  | )    |  |   | (2,629  | )
|                                                                                                                           |  |      |         |   |      |   |         |      |  |   |         |  
|Pro forma net income                                                                                                       |  | $    | 190,841 |   |      | $ | 154,214 |      |  | $ | 125,178 |  
|                                                                                                                           |  |      |         |   |      |   |         |      |  |   |         |  
|Basic earnings per share as reported                                                                                       |  | $    | 1.95    |   |      | $ | 1.75    |      |  | $ | 1.53    |  
|Pro forma basic earnings per share                                                                                         |  |      | 1.92    |   |      |   | 1.72    |      |  |   | 1.50    |  
|Diluted earnings per share as reported                                                                                     |  |      | 1.93    |   |      |   | 1.73    |      |  |   | 1.52    |  
|Pro forma diluted earnings per share                                                                                       |  |      | 1.90    |   |      |   | 1.71    |      |  |   | 1.49    |  



The pro forma effects are computed
using option-pricing models, with the following weighted average assumptions as of the grant date:



|                                |  |      |   |  |      |   |  |      |  
|------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                |  | 2004 |   |  | 2003 |   |  | 2002 |  
|Risk-free interest rate         |  | 3.20 | % |  | 3.41 | % |  | 5.15 | %
|Expected option life (years)    |  | 7.00 |   |  | 7.00 |   |  | 7.00 |  
|Expected stock price volatility |  | 23   | % |  | 24   | % |  | 28   | %
|Dividend yield                  |  | 3.34 | % |  | 3.50 | % |  | 3.60 | %



Statement of Cash Flows



Sky Financial considers cash on hand, deposits maintained with the
Federal Reserve Bank and cash due from other banks, all of which are included in the caption cash and due from banks, as cash for purposes of the Statement of Cash Flows. Sky Financial reports net cash flows for federal funds sold and
purchased, interest-bearing deposits with other financial institutions, client loan transactions, deposit transactions, repurchase agreements and short-term borrowings.



Comprehensive Income



Comprehensive income consists of net income and other comprehensive income. Other comprehensive income (loss) includes unrealized gains and losses on securities available
for sale and adjustments related to cash flow hedges that are also recognized as separate components of equity.



37



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 1Summary of Significant Accounting Policies (continued)



Non-bank Revenue Recognition



Trust service revenues include fees for services such as asset management, record keeping, retirement services and estate management. Income is recognized on an accrual
basis at the time the related services are performed.



Brokerage and insurance revenues include commission and fees relating to the sales of policies and investments as well as fees for related insurance services. Commission income is recognized as of the effective date of the insurance policy
with a reserve established for policy cancellations. Contingent performance-based commissions from insurance companies are recognized when earned and no contingencies remain.



New Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, which revises SFAS No. 123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. This Statement focuses primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. This Statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers Accounting for Stock Ownership Plans.
This Statement requires an entity to recognize the cost of employee services received in share-based payment transactions and measure the cost on a grant-date fair value of the award. That cost will be recognized over the period during which an
employee is required to provide service in exchange for the award. The provisions of SFAS No. 123 (revised 2004) will be effective for the Companys financial statements issued for periods beginning after June 15, 2005. The methodology and
timing of adoption has not yet been determined.



In March 2004,
the Financial Accounting Standards Board ratified the consensus reached by the Emerging Issues Task Force in Issue 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (EITF 03-1). EITF 03-1
provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. In September 2004, the FASB issued FSP 03-1-1, which delayed the effective date for the
measurement and recognition guidance contained in paragraphs 1020 of Issue 03-1 due to additional proposed guidance. At December 31, 2004, gross unrealized losses on available-for-sale securities was $24,563. Sky Financial is continuing to
evaluate the impact of EITF 03-1. The amount of other-than-temporary impairment to be recognized, if any, will be dependent on market conditions, managements intent and ability to hold investments until a forecasted recovery and the
finalization of the proposed guidance by the FASB.



In March
2004, the SEC issued Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments (SAB 105). This bulletin was issued to inform registrants of the SECs view that the fair value of the recorded loan
commitments, which are required to follow derivative accounting under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities, should not consider the expected future cash flows related to the associated servicing of
the future loan. The provisions of SAB 105 must be applied to loan commitments accounted for as derivatives that are entered into after March 31, 2004. The adoption of this Staff Accounting Bulletin in the second quarter of 2004 did not have a
material impact on Sky Financial.



In December 2003, the
Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued AICPA Statement of Position No. 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), to address
accounting for differences between the contractual cash flows of certain loans and debt securities and the cash flows expected to be collected when loans or debt securities are acquired in a transfer and those cash flow differences are attributable,
at least in part, to credit quality. As such, SOP 03-3 applies to such loans and debt securities purchased or acquired in purchase business combinations and does not apply to originated loans. The application of SOP 03-3 limits the interest income,
including accretion of purchase price discounts that may be recognized for certain loans and debt securities. Additionally, SOP 03-3 requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable
difference) not be recognized as an adjustment of yield or valuation allowance, such as the allowance for loan losses. Subsequent to the initial investment, increases in expected cash flows generally should be recognized prospectively through
adjustment of the yield on the loan or debt security over its remaining life. Decreases in expected cash flows should be recognized as impairment. SOP 03-3 is effective for loans and debt securities acquired in fiscal years beginning after December
15, 2004, with early application encouraged. The impact of this new pronouncement is not expected to be material to Sky Financials financial condition, results of operations or cash flows.



In December 2003, the FASB issued Interpretation No. 46 (Revised 2003)
Consolidation of Variable Interest Entities, (FIN 46-R). FIN 46-R requires that subsidiaries defined as variable interest entities be consolidated by the enterprise that will absorb the majority of the entities expected losses if
they occur, receive a majority of the variable interest entities residual returns if they occur, or both. Sky Financial, through fully-consolidated wholly-owned subsidiaries, sponsors five trust-preferred security issuing vehicles. Sky
Financial determined that these five trust preferred subsidiaries meet the definition of variable interest entities and that Sky Financial is not the primary beneficiary of these subsidiaries activities. Accordingly, with the adoption of FIN
46-R on December 31, 2003, Sky Financial deconsolidated the accounts of these trust-preferred subsidiaries, resulting in a recharacterization of the underlying consolidated debt obligation from the previous trust-preferred securities obligations to
the junior subordinated debenture obligations that exist between Sky Financial and the trust-preferred subsidiaries. There was no material impact to the results of operations, capital or liquidity as a result of applying the provisions of FIN 46-R.



In June 2002, the FASB issued SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities. This statement addresses the timing of recognition of a liability for exit and disposal costs at the time a liability is incurred, rather than at a plan commitment date, as previously
required by U.S. GAAP. Exit or disposal costs are measured at fair value and are subsequently adjusted for changes in estimated cash flows. The adoption of this statement on January 1, 2003 did not have a material impact on Sky Financial.



Reclassifications



Certain items in the prior-year financial statements were reclassified to conform to the
current-year presentation.



38



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##### Table of Contents

Note 2Mergers, Acquisitions, Business Formations and Divestitures



Community Banking Acquisitions



On December 22, 2004, Sky Financial announced an agreement to acquire Belmont Bancorp and
its wholly-owned subsidiary, Belmont National Bank, a $297 million commercial bank. Under the terms of the agreement, shareholders of Belmont will receive cash, shares of Sky Financial or a combination thereof, based upon an election process to
occur prior to closing. Cash consideration is valued at $6.15 per Belmont share and stock consideration is fixed at an exchange ratio of 0.219 shares of Sky Financial for each share of Belmont. The agreement further provides that, in the aggregate,
72.5% of the Belmont shares will be exchanged for Sky Financial common stock, with the remainder of Belmont shares exchanged for cash. The transaction is valued at $69.2 million, based upon Sky Financials closing stock price as of December 21,
2004 and is expected to close in the second quarter of 2005.



On November 30, 2004, Sky Financial acquired Prospect Bancshares, Inc. (Prospect), a $202 million bank holding company headquartered in Worthington, Ohio, and its wholly-owned subsidiary Prospect Bank by acquiring all of the outstanding
capital stock of Prospect Bancshares for an aggregate purchase price of $46,754, including direct acquisition costs of $77. Prospect Bancshares shareholders received approximately 1,139 shares of Sky Financial common stock and cash of $17.6 million.



On July 1, 2004, Sky Financial acquired Second Bancorp
Incorporated (Second Bancorp), a $2.0 billion bank holding company headquartered in Warren, Ohio, and its wholly-owned subsidiary Second National Bank of Warren by acquiring all of the outstanding capital stock of Second Bancorp for an aggregate
purchase price of $312,738, including direct acquisition costs of $2,093. Second Bancorp shareholders received approximately 11,953 shares of Sky Financial common stock.



On October 19, 2003, Sky Financial acquired GLB Bancorp, Inc. (GLB), a $225 million bank holding company headquartered in
Mentor, Ohio, and its wholly-owned subsidiary Great Lakes Bank, by acquiring all of the outstanding capital stock of GLB for an aggregate purchase price of $43,263, including direct acquisition costs of $191. GLB shareholders received 1,717 shares
of Sky Financial common stock.



On April 30, 2003, Sky
Financial acquired the outstanding capital stock of Metropolitan Financial Corp (Metropolitan), a $1.5 billion savings and loan holding company headquartered in Highland Hills, Ohio, and its wholly-owned subsidiary, Metropolitan Bank and Trust
Company, for a purchase price of $81,294, including direct acquisition costs of $673. Metropolitan shareholders received 2,887 shares of Sky Financial common stock and $25,327 in cash.



On October 1, 2002, Sky Financial acquired Three Rivers Bancorp (Three Rivers), a $1 billion bank holding company
headquartered in Monroeville, Pennsylvania and its wholly-owned subsidiary, Three Rivers Bank and Trust Company, by acquiring all of the outstanding capital stock of Three Rivers for a total purchase price of $136,626, including direct acquisition
costs of $780. Three Rivers shareholders received 4,854 shares of Sky Financial common stock and cash of $41,799.



The acquisitions complement Sky Financials operations in its regional banking structure by enhancing its presence in these areas. The value of the
common stock issued for each of the acquisitions was determined based on the market price of Sky Financials common stock on the date that the final terms of the acquisitions were agreed to and announced. The results of operations for the
acquired institutions have been included in the consolidated financial statements since the date of acquisition. The purchase price allocation for Second and Prospect are preliminary. The following table presents the allocation of the purchase
price, including direct acquisition costs, for the Prospect, Second, GLB and Metropolitan acquisitions to assets acquired and liabilities assumed, based on their fair values:



|                                   |  |          |         |        |   |           |  |              |         |  |   |          
|---------------------------------- |  | -------- | ------- | ------ | - | --------- |  | ------------ | ------- |  | - | ---------
|                                   |  | Prospect |         | Second |   | GLB       |  | Metropolitan
|Cash and interest-earning deposits |  | $        | 4,062   |        | $ | 44,683    |  | $            | 11,188  |  | $ | 73,724   
|Loans                              |  |          | 196,533 |        |   | 1,293,706 |  |              | 161,657 |  |   | 960,957  
|Securities available for sale      |  |          | 1,105   |        |   | 519,029   |  |              | 42,839  |  |   | 188,347  
|Premises and equipment             |  |          | 4,134   |        |   | 18,955    |  |              | 2,818   |  |   | 11,446   
|Core deposit intangible assets     |  |          | 2,140   |        |   | 31,449    |  |              | 1,759   |  |   | 11,807   
|Goodwill                           |  |          | 31,082  |        |   | 245,138   |  |              | 12,954  |  |   | 60,209   
|Other assets                       |  |          | 4,032   |        |   | 98,449    |  |              | 1,098   |  |   | 84,722   
|                                   |  |          |         |        |   |           |  |              |         |  |   |          
|Total assets acquired              |  |          | 243,088 |        |   | 2,251,409 |  |              | 234,313 |  |   | 1,391,212
|                                   |  |          |         |        |   |           |  |              |         |  |   |          
|Deposits                           |  |          | 169,986 |        |   | 1,251,801 |  |              | 189,325 |  |   | 949,725  
|Debt                               |  |          | 15,790  |        |   | 646,315   |  |              |        |  |   | 314,892  
|Other liabilities                  |  |          | 10,558  |        |   | 40,555    |  |              | 1,725   |  |   | 45,301   
|                                   |  |          |         |        |   |           |  |              |         |  |   |          
|Total liabilities acquired         |  |          | 196,334 |        |   | 1,938,671 |  |              | 191,050 |  |   | 1,309,918
|                                   |  |          |         |        |   |           |  |              |         |  |   |          
|Net assets acquired                |  | $        | 46,754  |        | $ | 312,738   |  | $            | 43,263  |  | $ | 81,294   
|                                   |  |          |         |        |   |           |  |              |         |  |   |          



39



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 2Mergers, Acquisitions, Business Formations and Divestitures (continued)



The following (unaudited) pro forma consolidated results of operations have
been prepared as if the acquisitions of Prospect and Second occurred as of the beginning of each period presented, with GLB and Metropolitan being presented as of January 1, 2003:



|                                                      |  |      |         |      |   |        
|----------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|December 31,                                          |  | 2004 |         | 2003
|Net interest income                                   |  | $    | 485,633 |      | $ | 481,096
|Income from continuing operations                     |  |      | 158,702 |      |   | 166,678
|Income from continuing operations per share - Basic   |  |      | 1.49    |      |   | 1.59   
|Income from continuing operations per share - Diluted |  |      | 1.48    |      |   | 1.58   
|Net income                                            |  |      | 177,857 |      |   | 170,615
|Net income per share  Basic                          |  |      | 1.67    |      |   | 1.63   
|Net income per share  Diluted                        |  |      | 1.65    |      |   | 1.61   



The pro forma
information includes impairment charges related to Seconds marine portfolio of $19.1 million ($12.4 million after tax) as well as merger costs of approximately $16 million ($10.4 million after tax) recorded in the second quarter of 2004.



Sky Financial recorded merger, integration and restructuring
charges totaling $2,952, $2,975 and $6,784 after tax during 2004, 2003 and 2002, respectively, related to the acquisitions. See Note 16 for additional discussion. The pro forma information presented is for informational purposes only and is not
indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection.



Financial Service Affiliate Acquisitions



On July 1, 2004, Sky Financial acquired Stouffer-Herzog Insurance Agency in conjunction with the purchase of Second Bancorp, as previously discussed.



On April 1, 2004, Sky Financial acquired EOB, Inc., a group benefit insurance
agency headquartered in Canton, Ohio, for 177 shares of Sky Financial common stock and $516 in cash.



On January 5, 2004, Sky Financial acquired Spencer-Patterson Insurance Agency, a full-service professional liability, personal and commercial agency
headquartered in Findlay, Ohio, for 297 shares of Sky Financial common stock and $793 in cash.



On July 8, 2003, Sky Financial acquired Insurance Buyers Service Agency, Inc., a professional liability, personal and commercial insurance agency headquartered in Boardman, Ohio, for 164 shares of Sky Financial common
stock.



In April 2002, Sky Financial acquired Value Added
Benefits, Ltd., a wholesale insurance agency headquartered in Cleveland, Ohio, for $1,900 in cash.



In January 2002, Sky Financial completed the acquisition of Celaris Group, Inc., a full service insurance agency headquartered in Bowling Green, Ohio. In
connection with the acquisition, Sky Financial paid $1,000 in cash and issued 748 shares of Sky Financial common stock. Sky Financial recognized approximately $18.2 million in goodwill as a result of this acquisition.



|                                      |  |                    |  |                   |  |              |              |           |   |               |  |             
|------------------------------------- |  | ------------------ |  | ----------------- |  | ------------ | ------------ | --------- | - | ------------- |  | ------------
|Entity                                |  | Location           |  | Date              |  | Total Assets |              | Cash Paid |   | Shares Issued
|Prospect Bancshares, Inc.             |  | Worthington, OH    |  | November 30, 2004 |  | $            | 0.2 billion  |           | $ | 17.6 million  |  | 1.1 million 
|Second Bancorp Incorporated           |  | Warren, OH         |  | July 1, 2004      |  |              | 2.0 billion  |           |   |               |  | 12.0 million
|EOB, Inc.                             |  | Canton, OH         |  | April 1, 2004     |  |              | 0.2 million  |           |   | 0.52 million  |  | 0.2 million 
|Spencer Patterson Insurance Agency    |  | Findlay, OH        |  | January 5, 2004   |  |              | 0.3 million  |           |   | 0.79 million  |  | 0.3 million 
|Great Lakes Bancorp                   |  | Mentor, OH         |  | October 19, 2003  |  |              | 0.2 billion  |           |   |               |  | 1.7 million 
|Insurance Buyers Service Agency, Inc. |  | Boardman, OH       |  | July 8, 2003      |  |              | 4.0 million  |           |   |               |  | 0.2 million 
|Metropolitan Financial Corp           |  | Highland Hills, OH |  | April 30, 2003    |  |              | 1.5 billion  |           |   | 25.3 million  |  | 2.9 million 
|Three Rivers Bancorp                  |  | Monroeville, PA    |  | October 1, 2002   |  |              | 1.1 billion  |           |   | 41.8 million  |  | 4.9 million 
|Value Added Benefits, Ltd.            |  | Cleveland, OH      |  | April 9, 2002     |  |              | 0.1 million  |           |   | 1.9 million   |  |             
|Celaris Group, Inc.                   |  | Bowling Green, OH  |  | January 30, 2002  |  |              | 18.5 million |           |   | 1.0 million   |  | 0.8 million 



Business Divestitures



On March 31, 2004, Sky Financial completed the sale of Sky Financial
Solutions, its dental financing affiliate. The sale resulted in a $31.2 million pre-tax gain. See Note 26.



40



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##### Table of Contents

Note 3Securities Available for Sale



The estimated fair values and unrealized gains and losses of securities available for sale at year-end are as follows:



|                                                 |  |                     |           |                      |   |                         |  |   |         |  
|------------------------------------------------ |  | ------------------- | --------- | -------------------- | - | ----------------------- |  | - | ------- | -
|                                                 |  | EstimatedFair Value |           | GrossUnrealizedGains |   | Gross Unrealized Losses | 
|2004                                             |  |                     |           |                      |   |                         |  |   |         |  
|U.S. Treasury                                    |  | $                   | 207       |                      | $ | 7                       |  | $ |         |  
|U.S. government agencies and corporations        |  |                     | 152,266   |                      |   | 565                     |  |   | (1,068  | )
|Obligations of states and political subdivisions |  |                     | 16,561    |                      |   | 128                     |  |   | (12     | )
|Corporate and other securities                   |  |                     | 51,699    |                      |   | 1,776                   |  |   | (205    | )
|Mortgage-backed securities                       |  |                     | 2,706,552 |                      |   | 10,331                  |  |   | (23,200 | )
|                                                 |  |                     |           |                      |   |                         |  |   |         |  
|Total debt securities available for sale         |  |                     | 2,927,285 |                      |   | 12,807                  |  |   | (24,485 | )
|Marketable equity securities                     |  |                     | 29,865    |                      |   | 1,420                   |  |   | (78     | )
|FHLB, FRB & Bankers Bank stock                  |  |                     | 134,663   |                      |   |                         |  |   |         |  
|                                                 |  |                     |           |                      |   |                         |  |   |         |  
|Total securities available for sale              |  | $                   | 3,091,813 |                      | $ | 14,227                  |  | $ | (24,563 | )
|                                                 |  |                     |           |                      |   |                         |  |   |         |  
|2003                                             |  |                     |           |                      |   |                         |  |   |         |  
|U.S. Treasury                                    |  | $                   | 211       |                      | $ | 10                      |  | $ |         |  
|U.S. government agencies and corporations        |  |                     | 325,947   |                      |   | 2,738                   |  |   | (508    | )
|Obligations of states and political subdivisions |  |                     | 22,337    |                      |   | 164                     |  |   | (33     | )
|Corporate and other securities                   |  |                     | 69,446    |                      |   | 3,011                   |  |   |         |  
|Mortgage-backed securities                       |  |                     | 1,955,606 |                      |   | 15,090                  |  |   | (15,620 | )
|                                                 |  |                     |           |                      |   |                         |  |   |         |  
|Total debt securities available for sale         |  |                     | 2,373,547 |                      |   | 21,013                  |  |   | (16,161 | )
|Marketable equity securities                     |  |                     | 45,862    |                      |   | 6,337                   |  |   | (938    | )
|FHLB, FRB & Bankers Bank stock                  |  |                     | 91,960    |                      |   |                         |  |   |         |  
|                                                 |  |                     |           |                      |   |                         |  |   |         |  
|Total securities available for sale              |  | $                   | 2,511,369 |                      | $ | 27,350                  |  | $ | (17,099 | )
|                                                 |  |                     |           |                      |   |                         |  |   |         |  



Sky Financial evaluates its securities
portfolio for impairment throughout the year. An impairment is recorded against individual equity securities if their cost significantly exceeds their fair value for a substantial amount of time. An impairment is also recorded for investments in
debt securities, unless the decrease in fair value is attributable to interest rates and management has the intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market
value. The fair values of investments with an amortized cost in excess of their fair value at December 31, 2004 and 2003 are as follows:



|                                                 |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|------------------------------------------------ |  | ------------------- | --------- | --------------------- | ---------------- | ------- | ------------------- | ----- | --------------------- | ------- |  | ------------------- | ------ | --------------------- |  | - | --------- |  | - | ------- | -
|                                                 |  | Less than 1 year    |           |                       | More than 1 year |         |                     | Total |                      
|                                                 |  | AggregateFair Value |           | GrossUnrealizedLosses |                  |         | AggregateFair Value |       | GrossUnrealizedLosses |         |  | AggregateFair Value |        | GrossUnrealizedLosses | 
|December 31, 2004                                |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|U.S. Treasury                                    |  | $                   | 100       |                       | $                |        |                     |       | $                     |        |  | $                   |       |                       |  | $ | 100       |  | $ |        |  
|U.S. government agencies and corporations        |  |                     | 111,866   |                       |                  | (1,068  | )                   |       |                       |         |  |                     |        |                       |  |   | 111,866   |  |   | (1,068  | )
|Obligations of states and political subdivisions |  |                     |           |                       |                  |         |                     |       |                       | 1,224   |  |                     | (12    | )                     |  |   | 1,224     |  |   | (12     | )
|Corporate and other securities                   |  |                     | 7,433     |                       |                  | (205    | )                   |       |                       |         |  |                     |        |                       |  |   | 7,433     |  |   | (205    | )
|Mortgage-backed securities                       |  |                     | 1,303,719 |                       |                  | (14,687 | )                   |       |                       | 320,305 |  |                     | (8,513 | )                     |  |   | 1,624,024 |  |   | (23,200 | )
|                                                 |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|Total debt securities available for sale         |  |                     | 1,423,118 |                       |                  | (15,960 | )                   |       |                       | 321,529 |  |                     | (8,525 | )                     |  |   | 1,744,647 |  |   | (24,485 | )
|Marketable equity securities                     |  |                     | 7,378     |                       |                  | (70     | )                   |       |                       | 492     |  |                     | (8     | )                     |  |   | 7,870     |  |   | (78     | )
|                                                 |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|Total securities available for sale              |  | $                   | 1,430,496 |                       | $                | (16,030 | )                   |       | $                     | 322,021 |  | $                   | (8,533 | )                     |  | $ | 1,752,517 |  | $ | (24,563 | )
|                                                 |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|December 31, 2003                                |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|U.S. Treasury                                    |  | $                   |          |                       | $                |        |                     |       | $                     |        |  | $                   |       |                       |  | $ |          |  | $ |        |  
|U.S. government agencies and corporations        |  |                     | 62,889    |                       |                  | (508    | )                   |       |                       |         |  |                     |        |                       |  |   | 62,889    |  |   | (508    | )
|Obligations of states and political subdivisions |  |                     | 2,588     |                       |                  | (33     | )                   |       |                       |        |  |                     |       |                       |  |   | 2,588     |  |   | (33     | )
|Corporate and other securities                   |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|Mortgage-backed securities                       |  |                     | 892,230   |                       |                  | (15,620 | )                   |       |                       |        |  |                     |       |                       |  |   | 892,230   |  |   | (15,620 | )
|                                                 |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|Total debt securities available for sale         |  |                     | 957,707   |                       |                  | (16,161 | )                   |       |                       |        |  |                     |       |                       |  |   | 957,707   |  |   | (16,161 | )
|Marketable equity securities                     |  |                     | 23,544    |                       |                  | (938    | )                   |       |                       |        |  |                     |       |                       |  |   | 23,544    |  |   | (938    | )
|                                                 |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  
|Total securities available for sale              |  | $                   | 981,251   |                       | $                | (17,099 | )                   |       | $                     |        |  | $                   |       |                       |  | $ | 981,251   |  | $ | (17,099 | )
|                                                 |  |                     |           |                       |                  |         |                     |       |                       |         |  |                     |        |                       |  |   |           |  |   |         |  



41



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 3Securities Available for Sale (continued)



The estimated fair value of debt securities at December 31, 2004, by contractual maturity, are shown in the accompanying
table. Expected maturities will likely differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.



|                                             |  |                     |          
|-------------------------------------------- |  | ------------------- | ---------
|                                             |  | EstimatedFair Value
|Due in one year or less                      |  | $                   | 1,435    
|Due after one year through five years        |  |                     | 147,760  
|Due after five years through ten years       |  |                     | 713,183  
|Due after ten years through fifteen years    |  |                     | 893,475  
|Due after fifteen years through twenty years |  |                     | 339,053  
|Due after twenty years                       |  |                     | 832,379  
|                                             |  |                     |          
|Total debt securities available for sale     |  | $                   | 2,927,285
|                                             |  |                     |          



The gross realized
gains and losses from the sales of securities are as follows:



|                               |  |      |        |      |   |       |  |   |      
|------------------------------ |  | ---- | ------ | ---- | - | ----- |  | - | -----
|                               |  | 2004 |        | 2003 |   | 2002 
|Gross realized gains on sales  |  | $    | 16,866 |      | $ | 4,746 |  | $ | 5,137
|Gross realized losses on sales |  |      | 2,297  |      |   | 3,875 |  |   | 2,658



Securities pledged to
secure public deposits and repurchase agreements totaled $2,067,482 and $1,782,480 at December 31, 2004 and 2003, respectively.



Note 4Loans and Allowance for Credit Losses



The loan portfolio at year-end was as follows:



|                                       |  |      |            |      |   |          
|-------------------------------------- |  | ---- | ---------- | ---- | - | ---------
|                                       |  | 2004 |            | 2003
|Real estate loans:                     |  |      |            |      |   |          
|Construction                           |  | $    | 848,072    |      | $ | 491,086  
|Residential mortgage                   |  |      | 2,898,875  |      |   | 2,045,317
|Non-residential mortgage               |  |      | 3,498,746  |      |   | 2,896,116
|Commercial, financial and agricultural |  |      | 2,562,738  |      |   | 2,441,225
|Installment and credit card loans      |  |      | 807,687    |      |   | 770,901  
|                                       |  |      |            |      |   |          
|Total loans                            |  | $    | 10,616,118 |      | $ | 8,644,645
|                                       |  |      |            |      |   |          



Most of Sky
Financials business activity is conducted through Sky Bank with clients in the respective local areas of the bank. These areas encompass parts of eastern Ohio, western Ohio, eastern Indiana, southeastern Michigan, western Pennsylvania and
northern West Virginia. Sky Banks loan portfolio is diversified, consisting of commercial, residential, agribusiness, consumer and small business loans. In Sky Banks loan portfolio, no significant industry concentrations exist and
amounts related to highly-leveraged transactions are not significant. Total loans include overdrafts of $6,743 and $9,229 at December 31, 2004 and 2003, respectively.



Sky Financial evaluates each clients creditworthiness on a case-by-case basis. The amount of collateral obtained is
based on managements evaluation of the client. Collateral held relating to commercial, financial, agricultural and commercial mortgages varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing
commercial properties. Loans on which the accrual of interest has been discontinued totaled $143,207 and $81,979 at December 31, 2004 and 2003, respectively.



In the normal course of business, Sky Financial has made loans to certain directors, executive officers and their associates. Loan activity relating to
these individuals for 2004 is as follows:



|                                      |  |   |         |  
|------------------------------------- |  | - | ------- | -
|Aggregate balance - December 31, 2003 |  | $ | 25,410  |  
|New loans                             |  |   | 34,183  |  
|Repayments                            |  |   | (27,514 | )
|Other changes                         |  |   | (9,182  | )
|                                      |  |   |         |  
|Aggregate balance - December 31, 2004 |  | $ | 22,897  |  
|                                      |  |   |         |  



Activity in the
allowance for credit losses was as follows:



|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                   |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Balance at beginning of year                       |  | $    | 124,943 |   |      | $ | 106,675 |      |  | $ | 92,831  |  
|Provision for credit losses                        |  |      | 37,660  |   |      |   | 34,125  |      |  |   | 37,659  |  
|Loans charged-off                                  |  |      | (43,635 | ) |      |   | (41,563 | )    |  |   | (37,500 | )
|Recoveries                                         |  |      | 8,698   |   |      |   | 8,647   |      |  |   | 6,803   |  
|Allowance for acquired institutions/sold portfolio |  |      | 23,723  |   |      |   | 17,059  |      |  |   | 6,882   |  
|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Balance at end of year                             |  | $    | 151,389 |   |      | $ | 124,943 |      |  | $ | 106,675 |  
|                                                   |  |      |         |   |      |   |         |      |  |   |         |  





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##### Table of Contents

Note 4Loans and Allowance for Credit Losses (continued)



Information regarding impaired loans is as follows:



|                                                                   |  |      |        |      |   |       
|------------------------------------------------------------------ |  | ---- | ------ | ---- | - | ------
|For The Years Ended December 31,                                   |  | 2004 |        | 2003
|Year-end impaired loans with allowance for credit losses allocated |  | $    | 80,757 |      | $ | 61,619
|Year-end allowance for credit losses allocated to impaired loans   |  |      | 19,994 |      |   | 14,605
|Average investment in impaired loans during the year               |  |      | 84,076 |      |   | 70,438
|Cash-basis interest income recognized during the year              |  |      | 1,189  |      |   | 4,932 



Note 5Premises and Equipment



Premises and equipment as of year end are summarized as follows:



|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2004 |          |   | 2003 |  
|Land, buildings and improvements               |  | $    | 171,145  |   |      | $ | 169,827  |  
|Equipment, furniture and fixtures              |  |      | 157,896  |   |      |   | 144,160  |  
|Construction in process                        |  |      | 5,112    |   |      |   | 4,228    |  
|                                               |  |      |          |   |      |   |          |  
|Total premises and equipment                   |  |      | 334,153  |   |      |   | 318,215  |  
|Less accumulated depreciation and amortization |  |      | (178,687 | ) |      |   | (164,930 | )
|                                               |  |      |          |   |      |   |          |  
|Premises and equipment, net                    |  | $    | 155,466  |   |      | $ | 153,285  |  
|                                               |  |      |          |   |      |   |          |  



Included in premises
and equipment are buildings, land and land improvements that secure capitalized leases with a cost of $3,690 and $3,690, less accumulated amortization and depreciation of $3,380 and $3,160 at December 31, 2004 and 2003, respectively. Depreciation
expense was $20,967 in 2004, $19,575 in 2003 and $15,388 in 2002. Rental payments for land and buildings are accounted for as operating lease expense. Total rent expense amounted to $11,217 in 2004, $7,628 in 2003 and $4,908 in 2002.



Note 6Goodwill and Intangible Assets



Net goodwill activity by segment was as follows:



|                             |  |                  |         |                             |   |        |  |   |        
|---------------------------- |  | ---------------- | ------- | --------------------------- | - | ------ |  | - | -------
|                             |  | CommunityBanking |         | FinancialServicesAffiliates |   | Total 
|Balance at January 1, 2002   |  | $                | 23,134  |                             | $ | 10,778 |  | $ | 33,912 
|Acquired goodwill            |  |                  | 55,985  |                             |   | 18,879 |  |   | 74,864 
|                             |  |                  |         |                             |   |        |  |   |        
|Balance at December 31, 2002 |  | $                | 79,119  |                             | $ | 29,657 |  | $ | 108,776
|Acquired goodwill            |  |                  | 73,163  |                             |   | 3,920  |  |   | 77,083 
|                             |  |                  |         |                             |   |        |  |   |        
|Balance at December 31, 2003 |  | $                | 152,282 |                             | $ | 33,577 |  | $ | 185,859
|Acquired goodwill            |  |                  | 276,220 |                             |   | 13,179 |  |   | 289,399
|                             |  |                  |         |                             |   |        |  |   |        
|Balance at December 31, 2004 |  | $                | 428,502 |                             | $ | 46,756 |  | $ | 475,258
|                             |  |                  |         |                             |   |        |  |   |        



Effective January 1,
2002, Sky Financial adopted new accounting guidance changing post-acquisition accounting for goodwill and certain intangible assets. In accordance with this guidance, goodwill is not amortized but is reviewed annually for impairment. Sky Financial
completed the annual impairment test required by the new guidance during the second quarter of 2004 and determined that goodwill is not impaired.



Other intangible assets at December 31, 2004 and 2003 were $71,674 and $51,155, respectively, net of accumulated amortization of $11,053 and $10,862,
respectively. These assets consist primarily of core deposits intangibles and are continuing to be amortized in accordance with Sky Financials policy. Amortization expense related to the intangible assets was $10,979, $6,896 and $4,033 during
2004, 2003 and 2002, respectively. For the years ending 2005 through 2009, the estimated future amortization expense will be approximately $14,061, $13,010, $12,188, $11,266 and $8,700, respectively.



43



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 7Interest-Bearing Deposits



Total interest-bearing deposits as presented on the balance sheet are comprised of the following classifications at year-end:



|                                     |  |      |           |      |   |          
|------------------------------------ |  | ---- | --------- | ---- | - | ---------
|                                     |  | 2004 |           | 2003
|Interest-bearing demand              |  | $    | 325,751   |      | $ | 224,464  
|Savings, including MMDA              |  |      | 3,874,943 |      |   | 3,445,664
|Time                                 |  |      |           |      |   |          
|In denominations under $ 100,000     |  |      | 2,978,429 |      |   | 2,502,766
|In denominations of $100,000 or more |  |      | 1,579,958 |      |   | 1,109,367
|                                     |  |      |           |      |   |          
|Total interest-bearing deposits      |  | $    | 8,759,081 |      | $ | 7,282,261
|                                     |  |      |           |      |   |          



At December 31, 2004, the scheduled
maturities of time deposits are as follows:



|           |  |   |          
|---------- |  | - | ---------
|2005       |  | $ | 2,311,113
|2006       |  |   | 1,345,113
|2007       |  |   | 510,162  
|2008       |  |   | 186,537  
|2009       |  |   | 156,310  
|Thereafter |  |   | 49,152   
|           |  |   |          
|           |  | $ | 4,558,387
|           |  |   |          



Note 8Securities Sold Under
Repurchase Agreements and Federal Funds Purchased



Sky Financial has retail
repurchase agreements with clients within its local market areas, as well as federal funds purchased from other banks. These borrowings are collateralized with securities owned by Sky Bank and held in its safekeeping accounts at independent
correspondent banks.



Sky Financial also has repurchase
agreements with brokerage firms that are in possession of the underlying securities. The securities are returned to Sky Financial at the maturity of the agreements.



The following table summarizes certain information relative to these borrowings:



|                                                           |  |      |           |   |      |   |         |  
|---------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ------- | -
|                                                           |  | 2004 |           |   | 2003 |  
|Outstanding at year-end                                    |  | $    | 1,041,361 |   |      | $ | 994,896 |  
|Weighted average interest rate at year-end                 |  |      | 2.55      | % |      |   | 2.05    | %
|Maximum amount outstanding as of any month-end             |  | $    | 1,041,361 |   |      | $ | 996,376 |  
|Average amount outstanding                                 |  |      | 897,438   |   |      |   | 849,464 |  
|Approximate weighted average interest rate during the year |  |      | 2.08      | % |      |   | 2.17    | %



Included in the above
as of December 31, 2004, are repurchase agreements in excess of one year as summarized below:



|                                                  |  |   |         |                                                        |     |                                                   |    
|------------------------------------------------- |  | - | ------- | ------------------------------------------------------ | --- | ------------------------------------------------- | ---
|                                                  |  |   |         | Weighted Average Life in Years Based on StatedMaturity |     | Weighted Average Life in Years Based on CallDates
|Stated maturity in 2006                           |  | $ | 45,000  |                                                        | 1.1 |                                                   | 1.0
|Stated maturity in 2007                           |  |   | 43,799  |                                                        | 2.8 |                                                   | 1.5
|Stated maturity in 2008                           |  |   | 139,000 |                                                        | 3.5 |                                                   | 3.5
|Stated maturity in 2011                           |  |   | 30,918  |                                                        | 6.1 |                                                   | 6.1
|                                                  |  |   |         |                                                        |     |                                                   |    
|Total repurchase agreements in excess of one year |  | $ | 258,717 |                                                        | 3.3 |                                                   | 3.0
|                                                  |  |   |         |                                                        |     |                                                   |    



The weighted average
rate on repurchase agreements in excess of one year was 4.52% at December 31, 2004 and 5.37% at December 31, 2003.



At December 31, 2003, repurchase agreements in excess of one year were $258,767 with a weighted average life based on stated maturity of 4.3 years and a
weighted average life based on call dates of 0.4 years.



Note 9Debt and
Federal Home Loan Bank Advances



Sky Financials debt and Federal Home
Loan Bank (FHLB) advances are comprised of the following at December 31:



|                                                                                 |  |      |           |      |   |          
|-------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                                                                 |  | 2004 |           | 2003
|Borrowings under bank line of credit                                             |  | $    |          |      | $ | 61,000   
|Borrowings under FHLB line of credit at weighted interest rate of 3.82% for 2004 |  |      | 1,569,556 |      |   | 1,084,133
|Subordinated note at 7.08%, due January 2008                                     |  |      | 50,000    |      |   | 50,000   
|Subordinated note at 6.125%, due October 2012                                    |  |      | 65,000    |      |   | 65,000   
|Subordinated note at 5.35%, due April 2013                                       |  |      | 50,000    |      |   | 50,000   
|Junior subordinated debentures owed to unconsolidated subsidiary trusts          |  |      | 189,558   |      |   | 164,806  
|Capital lease obligation                                                         |  |      | 726       |      |   | 1,117    
|Other items                                                                      |  |      |          |      |   | 508      
|                                                                                 |  |      |           |      |   |          
|Total                                                                            |  | $    | 1,924,840 |      | $ | 1,476,564
|                                                                                 |  |      |           |      |   |          



44



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##### Table of Contents

Note 9Debt and Federal Home Loan Bank Advances (continued)



Lines of Credit



Sky Financial maintains a credit facility with a group of financial institutions in the form of a short-term line of credit. This line of
credit is subject to renewal on an annual basis. The commitment on the line was $100,000 in 2004 and $120,000 in 2003. Interest on advances taken on the facility is accrued at either a formula based on the London Interbank Offering Rate (LIBOR), or
a formula based on the federal funds rate. Sky Financial may elect the interest rate method to be applied to amounts outstanding. The agreement provides for a quarterly fee of .150% on the commitment amount of the credit facility. The agreement
contains covenants that require Sky Financial, among other things, to maintain an acceptable level of capital and asset quality as defined by the agreement. The average amount outstanding in 2004 was $14,158, with an average cost of 1.80%, compared
to $67,000, with an average cost of 1.90% in 2003.



FHLB Advances



FHLB advances are collateralized by all shares of FHLB stock owned by the
subsidiary bank and by 100% of the subsidiary banks qualified residential mortgage loans. The subsidiary bank may increase its borrowing capacity by pledging securities. Based on the carrying amount of FHLB stock owned by the subsidiary bank,
total FHLB advances are limited to approximately $1,681,257, subject to the availability of qualified residential mortgage loans for pledging.



Subordinated Notes



During March 2003, Sky Financial sold $50,000 in subordinated note arrangements in a private transaction pursuant to an applicable exemption from registration under the Securities Act of 1933. Sky Financial used these
proceeds to pay Metropolitans shareholders who elected to receive cash as merger consideration in exchange for their common shares (see Note 2). The remaining proceeds were used to pay down $13,960 of Metropolitan subordinated debt and other
working capital purposes.



Junior Subordinated Debentures/Obligated
Mandatorily Redeemable Capital Securities



Beginning in 1997, Sky
Financial has issued obligated mandatorily redeemable capital securities through fully-consolidated subsidiaries. The trust preferred entities were formed for the purpose of issuing capital securities to third parties and investing the proceeds from
the sale of such securities solely in junior subordinated debentures of Sky Financial. The debentures held by each trust are the sole assets of that trust. Distributions on the capital securities issued by each trust are payable semi-annually or
quarterly at a rate per annum equal to the interest rate being earned by the trust on the debentures held by that trust.



The amounts of these capital securities represent the par value adjusted for any unamortized discount or other basis adjustments related to hedging the
debt with derivative instruments. See Notes 1 and 10 for further discussion on derivative instruments. The borrowings are redeemable after a certain date at their stated face values or at a premium if redemption occurs before that date.



On June 30, 2004, Sky Financial called the Metropolitan Capital Trust II
at the par value of $16,000. The note had been issued by Metropolitan Bank in May 1999 at a fixed rate of 9.50%.



On September 25, 2003, Sky Financial issued $10,000 in obligated mandatorily redeemable capital securities of subsidiary trusts. On October 14, 2003, Sky
Financial received an additional $20,000 under the same issuance. The interest rate on the issuance is based on LIBOR plus 2.95%. The debt is redeemable beginning in October 2003 at 104.40% of its principal amount, with the redemption price
decreasing every year thereafter until 2008, at which time it is redeemable at par. During October 2003, the proceeds of this issuance were used to call and settle $27,750 of obligated redeemable capital securities and related interest.



During the fourth quarter of 2003, Sky Financial deconsolidated the
accounts of these trust-preferred entities in accordance with FASB Interpretation No. 46 (revised 2003). The deconsolidation of the net assets increased Sky Financials consolidated debt obligation by $5,076, the difference representing Sky
Financials common ownership in the trusts. The deconsolidation has no impact on Sky Financials liquidity position because it continues to be obligated to repay the debentures held by the trust-preferred entities and guarantees repayment
of the capital securities issued by the trusts.



The capital
securities held by the trusts qualify as Tier I capital for Sky Financial under the Federal Reserve Boards regulatory framework. The Federal Reserve Board is currently evaluating whether the capital securities continue to qualify as Tier I
capital due to the deconsolidation of the related trust-preferred entities. If the Federal Reserve Board disqualifies the capital securities as Tier I capital, the effect of such a change could have a material impact on Sky Financials
regulatory capital ratios.



The following table summarizes the
issuance date, par value, interest rate, redemption price, redemption date and hedged average rate for the junior subordinated debentures at December 31, 2004:



|                               |  |                    |  |          |        |              |          |   |                 |        |   |                 |                   |                   |      |  
|------------------------------ |  | ------------------ |  | -------- | ------ | ------------ | -------- | - | --------------- | ------ | - | --------------- | ----------------- | ----------------- | ---- | -
|                               |  | Issuance Date      |  | ParValue |        | InterestRate |          |   | RedemptionPrice |        |   | Redemption Date |                   | HedgedAverageRate |     
|Sky Financial Capital Trust II |  | September 25, 2003 |  | $        | 30,000 |              | Variable |   |                 | 100.00 | % |                 | October 8, 2008   |                   | N/A  |  
|Prospect Trust I               |  | March 27, 2003     |  |          | 6,000  |              | Variable |   |                 | 100.00 |   |                 | April 7, 2008     |                   | N/A  |  
|Second Bancorp Capital Trust I |  | September 28, 2001 |  |          | 32,000 |              | 9.00     | % |                 | 100.00 |   |                 | December 31, 2006 |                   | N/A  |  
|Sky Financial Capital Trust I  |  | March 31, 2000     |  |          | 60,000 |              | 9.34     |   |                 | 104.67 |   |                 | May 1, 2010       |                   | 5.25 | %
|Mid Am Capital Trust           |  | June 30, 1997      |  |          | 23,600 |              | 10.20    |   |                 | 105.10 |   |                 | June 1, 2007      |                   | 6.65 |  
|First Western Capital Trust    |  | February 11, 1997  |  |          | 25,000 |              | 9.88     |   |                 | 104.94 |   |                 | February 1, 2007  |                   | 5.42 |  



45



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 9 Debt and Federal Home Loan Bank Advances (continued)



Consolidated debt obligations related to the trust-preferred entities follows:



|                                                                              |  |      |         |      |   |        
|----------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                              |  | 2004 |         | 2003
|Interest at 9.875%, due February 2027                                         |  | $    | 27,616  |      | $ | 27,765 
|Interest at 10.20%, due June 2027                                             |  |      | 24,983  |      |   | 24,491 
|Interest at 9.34%, due May 2030                                               |  |      | 65,872  |      |   | 64,955 
|Interest at 9.50%, due June 2029                                              |  |      |        |      |   | 16,667 
|Interest at 9.00%, due December 2031                                          |  |      | 33,729  |      |   |       
|Interest at 5.32% (variable), due April 2033                                  |  |      | 6,430   |      |   |       
|Interest at 5.02% (variable), due October 2033                                |  |      | 30,928  |      |   | 30,928 
|                                                                              |  |      |         |      |   |        
|Total junior subordinated debentures owed to unconsolidated subsidiary trusts |  | $    | 189,558 |      | $ | 164,806
|                                                                              |  |      |         |      |   |        



Other



At December 31, 2004, required annual principal payments on debt and FHLB advances are
presented in the following table:



|           |  |   |          
|---------- |  | - | ---------
|2005       |  | $ | 754,768  
|2006       |  |   | 197,480  
|2007       |  |   | 111,667  
|2008       |  |   | 173,120  
|2009       |  |   | 112,623  
|Thereafter |  |   | 575,182  
|           |  |   |          
|Total      |  | $ | 1,924,840
|           |  |   |          



Note 10Derivative Instruments
and Hedging Activities



Sky Financials hedging policies permit the use
of interest rate swaps, caps and floors to manage interest rate risk or to hedge specified assets and liabilities. Sky Financial uses derivative instruments, primarily interest rate swaps, to manage interest rate risk on certain assets by hedging
the fair value of certain fixed-rate debt, which converts the debt to variable rates, and by hedging the cash flow variability associated with certain variable rate debt by converting the debt to fixed rates.



All of the derivative instruments and hedging relationships below have been
designated and qualify as either fair value or cash flow hedges. To qualify for hedge accounting under SFAS No. 133, as amended, the effectiveness of each hedging relationship is assessed both at hedge inception and at each reporting period
thereafter. Also at the end of each reporting period, ineffectiveness in the hedging relationships is measured as the difference between the change in fair value of the derivative instruments and the change in fair value of either the hedged items
(fair value hedges) or expected cash flows (cash flow hedges). Ineffectiveness, if any, is recorded in interest expense.



Fair Value Hedges  Interest Rate Swaps



Sky Financial has entered into interest rate swap arrangements to exchange the payments on fixed rate debt of $323,600 for variable rate payments based on LIBOR. The
interest rate swaps involve no exchange of principal either at inception or maturity and have maturities and call options identical to the fixed rate debt agreements. The arrangements have been designated as fair value hedges. The swaps are carried
at their fair value and the carrying amount of the subordinated debentures includes the change in their fair values since the inception of the hedge. Because the hedging arrangement is considered highly effective, changes in the interest rate
swaps fair values exactly offset the corresponding changes in the fair value of the junior subordinated debentures and, as a result, the changes in fair value do not result in an impact on net income.



Cash Flow Hedges  Interest Rate Swaps



Sky Financial has entered into, through its merger with Metropolitan Bank, two interest rate
swaps, whereby it pays a fixed rate of interest and receives a variable rate based on LIBOR. The interest rate swaps are designed to convert the variable interest rate to fixed rate on $40,000 of FHLB borrowings. The swaps are considered to be
highly effective. Accordingly, any change in the swaps fair value is recorded in other comprehensive income, net of tax. No ineffectiveness was recorded in income from continuing operations during 2004, 2003 or 2002.



Interest Rate Caps



During 2002, Sky Financial entered into two interest rate cap arrangements, and paid $1,456 to hedge its interest risk on $48,600 of federal
funds purchased. The interest rate caps are designed to offset the impact of changes in the federal fund purchased rate above the weighted average stated rate of 5.90%, and, as such, are considered to be highly effective. Any changes in the
intrinsic values are recorded in other comprehensive income. Changes in the time values of the interest rate caps, which are excluded from the assessment of hedge effectiveness, increased interest expense by $220 in 2004, $219 in 2003 and $73 in
2002.



No deferred gains or losses in accumulated other
comprehensive income at December 31, 2004 are expected to be reclassified to income from continuing operations in 2005.



46



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Note 10Derivative Instruments and Hedging Activities (continued)



The following table presents the contract/notional and fair value amounts of all derivative
transactions at December 31, 2004 and 2003:



|                     |  |                |         |           |   |        |           |  |      |              |  |      |               |  |      
|-------------------- |  | -------------- | ------- | --------- | - | ------ | --------- |  | ---- | ------------ |  | ---- | ------------- |  | -----
|                     |  | NotionalAmount |         | FairValue |   |        | FixedRate |  |      | VariableRate |  |      | MaturityYears
|At December 31, 2004 |  |                |         |           |   |        |           |  |      |              |  |      |               |  |      
|Interest rate swaps  |  |                |         |           |   |        |           |  |      |              |  |      |               |  |      
|Fair value hedges    |  | $              | 323,600 |           | $ | 8,912  |           |  | 7.07 | %            |  | 4.54 | %             |  | 11.14
|Cash flow hedges     |  |                | 40,000  |           |   | (1,186 | )         |  | 6.36 |              |  | 2.29 |               |  | 0.73 
|Interest rate caps   |  |                | 48,600  |           |   | 263    |           |  |     |              |  |     |               |  | 3.91 
|                     |  |                |         |           |  
|At December 31, 2003 |  |                |         |           |   |        |           |  |      |              |  |      |               |  |      
|Interest rate swaps  |  |                |         |           |   |        |           |  |      |              |  |      |               |  |      
|Fair value hedges    |  | $              | 108,600 |           | $ | 5,129  |           |  | 9.65 | %            |  | 4.93 | %             |  | 25.02
|Cash flow hedges     |  |                | 40,000  |           |   | (3,291 | )         |  | 6.36 |              |  | 1.17 |               |  | 1.87 
|Interest rate caps   |  |                | 48,600  |           |   | 728    |           |  |     |              |  |     |               |  | 5.00 



Note 11Income Taxes



Income taxes consisted of the following:



|                                 |  |      |        |      |   |        |  |   |        |  
|-------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | -
|                                 |  | 2004 |        | 2003 |   | 2002   | 
|Current                          |  |      |        |      |   |        |  |   |        |  
|Federal                          |  | $    | 75,407 |      | $ | 61,400 |  |   | 70,552 |  
|State and local                  |  |      | 541    |      |   | 78     |  |   | 392    |  
|                                 |  |      |        |      |   |        |  |   |        |  
|                                 |  |      | 75,948 |      |   | 61,478 |  |   | 70,944 |  
|                                 |  |      |        |      |   |        |  |   |        |  
|Deferred                         |  |      |        |      |   |        |  |   |        |  
|Federal                          |  |      | 9,378  |      |   | 14,600 |  |   | (5,219 | )
|State and local                  |  |      | 18     |      |   | 72     |  |   | (13    | )
|                                 |  |      |        |      |   |        |  |   |        |  
|                                 |  |      | 9,396  |      |   | 14,672 |  |   | (5,232 | )
|                                 |  |      |        |      |   |        |  |   |        |  
|Total provision for income taxes |  | $    | 85,344 |      | $ | 76,150 |  | $ | 65,712 |  
|                                 |  |      |        |      |   |        |  |   |        |  



The sources of gross
deferred tax assets and liabilities were as follows at December 31:



|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                   |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Items giving rise to deferred tax assets:          |  |      |         |   |      |   |         |      |  |   |         |  
|Allowance for loan losses in excess of tax reserve |  | $    | 52,949  |   |      | $ | 43,702  |      |  | $ | 36,825  |  
|Intangible assets                                  |  |      | 5,182   |   |      |   | 6,974   |      |  |   | 8,166   |  
|Deferred compensation                              |  |      | 10,928  |   |      |   | 9,110   |      |  |   | 8,140   |  
|Net deferred loan fees and costs                   |  |      | 5,737   |   |      |   | 4,540   |      |  |   | 3,319   |  
|Interest on non-accrual loans                      |  |      | 5,220   |   |      |   | 1,493   |      |  |   | 588     |  
|Post-retirement benefits                           |  |      | 1,592   |   |      |   | 1,118   |      |  |   | 1,118   |  
|Net operating loss carryforward                    |  |      | 11,722  |   |      |   | 622     |      |  |   |        |  
|Cash flow hedge                                    |  |      | 604     |   |      |   | 1,160   |      |  |   | 398     |  
|Unrealized loss on securities available for sale   |  |      | 3,323   |   |      |   |        |      |  |   |        |  
|Merger, integration and restructuring expense      |  |      | 863     |   |      |   | 649     |      |  |   | 1,870   |  
|Other                                              |  |      | 2,249   |   |      |   | 3,658   |      |  |   | 568     |  
|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|                                                   |  |      | 100,369 |   |      |   | 73,026  |      |  |   | 60,992  |  
|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Items giving rise to deferred tax liabilities:     |  |      |         |   |      |   |         |      |  |   |         |  
|Depreciation                                       |  |      | (3,621  | ) |      |   | (1,906  | )    |  |   | (310    | )
|FHLB stock dividends                               |  |      | (13,947 | ) |      |   | (9,757  | )    |  |   | (7,606  | )
|Mortgage servicing rights                          |  |      | (14,218 | ) |      |   | (9,868  | )    |  |   | (5,960  | )
|Unrealized gain on securities available for sale   |  |      |        |   |      |   | (4,349  | )    |  |   | (17,986 | )
|Purchase accounting adjustments                    |  |      | (4,765  | ) |      |   | (1,884  | )    |  |   | (4,541  | )
|Other                                              |  |      | (914    | ) |      |   | (240    | )    |  |   | (796    | )
|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|                                                   |  |      | (37,465 | ) |      |   | (28,004 | )    |  |   | (37,199 | )
|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Net deferred tax asset                             |  | $    | 62,904  |   |      | $ | 45,022  |      |  | $ | 23,793  |  
|                                                   |  |      |         |   |      |   |         |      |  |   |         |  





47



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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 11Income Taxes (continued)



Total federal income tax expense differs from the expected amounts computed by applying the statutory federal tax rate of 35% to income before taxes. The
reasons for this difference are as follows:



|                                                                                       |  |        |        |   |         |      |   |        |   |        |         |  |      |        |  |   |         |   |  |      |  
|-------------------------------------------------------------------------------------- |  | ------ | ------ | - | ------- | ---- | - | ------ | - | ------ | ------- |  | ---- | ------ |  | - | ------- | - |  | ---- | -
|                                                                                       |  | 2004   |        |   | 2003    |      |   | 2002   |  
|                                                                                       |  | Amount |        |   | TaxRate |      |   | Amount |   |        | TaxRate |  |      | Amount |  |   | TaxRate |  
|Income tax expense based upon the federal statutory rate on income before income taxes |  | $      | 91,190 |   |         | 35.0 | % |        | $ | 80,091 |         |  | 35.0 | %      |  | $ | 69,251  |   |  | 35.0 | %
|Bank-owned life insurance earnings                                                     |  |        | (2,055 | ) |         | (0.8 | ) |        |   | (2,147 | )       |  | (0.9 | )      |  |   | (1,912  | ) |  | (1.0 | )
|Tax exempt income                                                                      |  |        | (1,831 | ) |         | (0.7 | ) |        |   | (1,587 | )       |  | (0.7 | )      |  |   | (1,691  | ) |  | (0.9 | )
|Deductible ESOP dividends                                                              |  |        | (924   | ) |         | (0.4 | ) |        |   | (524   | )       |  | (0.2 | )      |  |   |        |   |  |     |  
|Dividend exclusions                                                                    |  |        | (494   | ) |         | (0.2 | ) |        |   | (412   | )       |  | (0.2 | )      |  |   | (420    | ) |  | (0.1 | )
|Other, net                                                                             |  |        | (542   | ) |         | (0.2 | ) |        |   | 729    |         |  | 0.3  |        |  |   | 484     |   |  | 0.2  |  
|                                                                                       |  |        |        |   |         |      |   |        |   |        |         |  |      |        |  |   |         |   |  |      |  
|                                                                                       |  | $      | 85,344 |   |         | 32.7 | % |        | $ | 76,150 |         |  | 33.3 | %      |  | $ | 65,712  |   |  | 33.2 | %
|                                                                                       |  |        |        |   |         |      |   |        |   |        |         |  |      |        |  |   |         |   |  |      |  



Tax expense
attributable to securities gains and losses totaled $5,099, $305 and $868 in 2004, 2003 and 2002, respectively.



Note 12Other Comprehensive Income (Loss)



Other comprehensive income (loss) consisted of the following:



|                                                            |  |      |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                            |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Other comprehensive income (loss)                           |  |      |         |   |      |   |         |      |  |   |         |  
|Securities available for sale:                              |  |      |         |   |      |   |         |      |  |   |         |  
|Unrealized (losses) gains arising during period             |  | $    | (6,018  | ) |      | $ | (40,269 | )    |  | $ | 36,382  |  
|Reclassification adjustment for gains included in income    |  |      | (14,569 | ) |      |   | (871    | )    |  |   | (2,479  | )
|Cash flow hedge derivatives:                                |  |      |         |   |      |   |         |      |  |   |         |  
|Change in fair value on cash flow hedge derivatives         |  |      | 8,598   |   |      |   | (4,857  | )    |  |   | (2,402  | )
|Amounts reclassified to income from discontinued operations |  |      | 616     |   |      |   | 3,489   |      |  |   | 3,155   |  
|                                                            |  |      |         |   |      |   |         |      |  |   |         |  
|Total                                                       |  |      | (11,373 | ) |      |   | (42,508 | )    |  |   | 34,656  |  
|Tax effect                                                  |  |      | 3,978   |   |      |   | 14,878  |      |  |   | (12,130 | )
|                                                            |  |      |         |   |      |   |         |      |  |   |         |  
|Total other comprehensive income (loss)                     |  | $    | (7,395  | ) |      | $ | (27,630 | )    |  | $ | 22,526  |  
|                                                            |  |      |         |   |      |   |         |      |  |   |         |  



Accumulated other
comprehensive income (loss) consisted of the following:



|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|--------------------------------- |  | --------------------------- | ------- | - | ---------------------------------------------- | - | ------ | ------------------------------------------- |  | - | ------- | -
|                                  |  | SecuritiesAvailablefor Sale |         |   | UnrealizedGains (Losses) onInterest Rate Swaps |   |        | Accumulated OtherComprehensiveIncome (Loss) | 
|December 31, 2001                 |  | $                           | 11,366  |   |                                                | $ | (5,804 | )                                           |  | $ | 5,562   |  
|Other comprehensive income (loss) |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|Pre-tax                           |  |                             | 33,903  |   |                                                |   | 753    |                                             |  |   | 34,656  |  
|Tax effect                        |  |                             | (11,866 | ) |                                                |   | (264   | )                                           |  |   | (12,130 | )
|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|Total                             |  |                             | 22,037  |   |                                                |   | 489    |                                             |  |   | 22,526  |  
|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|December 31, 2002                 |  |                             | 33,403  |   |                                                |   | (5,315 | )                                           |  |   | 28,088  |  
|Other comprehensive income (loss) |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|Pre-tax                           |  |                             | (41,140 | ) |                                                |   | (1,368 | )                                           |  |   | (42,508 | )
|Tax effect                        |  |                             | 14,399  |   |                                                |   | 479    |                                             |  |   | 14,878  |  
|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|Total                             |  |                             | (26,741 | ) |                                                |   | (889   | )                                           |  |   | (27,630 | )
|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|December 31, 2003                 |  |                             | 6,662   |   |                                                |   | (6,204 | )                                           |  |   | 458     |  
|Other comprehensive income (loss) |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|Pre-tax                           |  |                             | (20,587 | ) |                                                |   | 9,214  |                                             |  |   | (11,373 | )
|Tax effect                        |  |                             | 7,204   |   |                                                |   | (3,226 | )                                           |  |   | 3,978   |  
|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|Total                             |  |                             | (13,383 | ) |                                                |   | 5,988  |                                             |  |   | (7,395  | )
|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  
|December 31, 2004                 |  | $                           | (6,721  | ) |                                                | $ | (216   | )                                           |  | $ | (6,937  | )
|                                  |  |                             |         |   |                                                |   |        |                                             |  |   |         |  



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##### Table of Contents

Note 13Earnings Per Common Share



Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted
earnings per share is computed using the weighted average number of shares determined for the basic computation plus the dilutive effect of potential common shares issuable under stock options.



Basic and diluted earnings per share computations were as follows:



|                                                     |  |      |         |      |   |         |  |   |         |  
|---------------------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | -
|                                                     |  | 2004 |         | 2003 |   | 2002    | 
|Numerator                                            |  |      |         |      |   |         |  |   |         |  
|Income from continuing operations                    |  | $    | 175,200 |      | $ | 152,680 |  | $ | 132,148 |  
|Income (loss) from discontinued operations           |  |      | 19,155  |      |   | 3,937   |  |   | (4,341  | )
|                                                     |  |      |         |      |   |         |  |   |         |  
|Net income                                           |  | $    | 194,355 |      | $ | 156,617 |  | $ | 127,807 |  
|                                                     |  |      |         |      |   |         |  |   |         |  
|Denominator                                          |  |      |         |      |   |         |  |   |         |  
|Weighted-average common shares outstanding (basic)   |  |      | 99,461  |      |   | 89,630  |  |   | 83,439  |  
|Dilutive effect of stock options                     |  |      | 1,107   |      |   | 774     |  |   | 657     |  
|                                                     |  |      |         |      |   |         |  |   |         |  
|Weighted-average common shares outstanding (diluted) |  |      | 100,568 |      |   | 90,404  |  |   | 84,096  |  
|                                                     |  |      |         |      |   |         |  |   |         |  
|Basic Earnings Per Common Share                      |  |      |         |      |   |         |  |   |         |  
|Income from continuing operations                    |  | $    | 1.76    |      | $ | 1.70    |  | $ | 1.58    |  
|Income (loss) from discontinued operations           |  |      | 0.19    |      |   | 0.05    |  |   | (0.05   | )
|                                                     |  |      |         |      |   |         |  |   |         |  
|Net income                                           |  | $    | 1.95    |      | $ | 1.75    |  | $ | 1.53    |  
|                                                     |  |      |         |      |   |         |  |   |         |  
|Diluted Earnings Per Common Share                    |  |      |         |      |   |         |  |   |         |  
|Income from continuing operations                    |  | $    | 1.74    |      | $ | 1.69    |  | $ | 1.57    |  
|Income (loss) from discontinued operations           |  |      | 0.19    |      |   | 0.04    |  |   | (0.05   | )
|                                                     |  |      |         |      |   |         |  |   |         |  
|Net income                                           |  | $    | 1.93    |      | $ | 1.73    |  | $ | 1.52    |  
|                                                     |  |      |         |      |   |         |  |   |         |  



Weighted shares under
option of 38 in 2004, 856 in 2003 and 2,113 in 2002 were excluded from the diluted earnings per share calculation as they were anti-dilutive.



Note 14Fair Values of Financial Instruments



The following table shows carrying values and the related estimated fair values of financial instruments at year end. Items that are not financial instruments are not
included.



|                                                                        |  |                  |             |   |                      |   |             |                  |  |   |                      |   |  |   |            |  
|----------------------------------------------------------------------- |  | ---------------- | ----------- | - | -------------------- | - | ----------- | ---------------- |  | - | -------------------- | - |  | - | ---------- | -
|                                                                        |  | 2004             |             |   | 2003                 |  
|                                                                        |  | Carrying Amounts |             |   | Estimated Fair Value |   |             | Carrying Amounts |  |   | Estimated Fair Value |  
|Financial Assets:                                                       |  |                  |             |   |                      |   |             |                  |  |   |                      |   |  |   |            |  
|Cash and due from banks                                                 |  | $                | 232,407     |   |                      | $ | 232,407     |                  |  | $ | 251,364              |   |  | $ | 251,364    |  
|Interest-bearing deposits with other financial institutions             |  |                  | 32,919      |   |                      |   | 32,919      |                  |  |   | 22,808               |   |  |   | 22,808     |  
|Securities available for sale                                           |  |                  | 3,091,813   |   |                      |   | 3,091,813   |                  |  |   | 2,511,369            |   |  |   | 2,511,369  |  
|Loans held for sale and loans, net of the allowance for credit losses   |  |                  | 10,474,162  |   |                      |   | 10,413,983  |                  |  |   | 8,547,764            |   |  |   | 8,588,180  |  
|                                                                        |  |                  |             |  
|Financial Liabilities:                                                  |  |                  |             |   |                      |   |             |                  |  |   |                      |   |  |   |            |  
|Deposits                                                                |  |                  | (10,351,591 | ) |                      |   | (10,384,372 | )                |  |   | (8,515,533           | ) |  |   | (8,578,311 | )
|Securities sold under repurchase agreements and federal funds purchased |  |                  | (1,041,361  | ) |                      |   | (1,040,071  | )                |  |   | (994,896             | ) |  |   | (1,021,676 | )
|Debt, FHLB advances and junior subordinated debentures                  |  |                  | (1,924,114  | ) |                      |   | (1,926,177  | )                |  |   | (1,475,781           | ) |  |   | (1,523,135 | )
|                                                                        |  |                  |             |  
|Derivative Financial Instruments:                                       |  |                  |             |   |                      |   |             |                  |  |   |                      |   |  |   |            |  
|Interest rate swaps                                                     |  |                  | 7,726       |   |                      |   | 7,726       |                  |  |   | 1,838                |   |  |   | 1,838      |  
|Interest rate caps                                                      |  |                  | 263         |   |                      |   | 263         |                  |  |   | 728                  |   |  |   | 728        |  





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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 14Fair Values of Financial Instruments (continued)



For purposes of the above disclosures of estimated fair value, the following assumptions were used: the carrying values for cash and due
from banks and interest-bearing deposits with other financial institutions and were considered to approximate fair value; the estimated fair value for securities was based on quoted market values for the individual securities or for equivalent
securities; the estimated fair value for loans was based on estimates of the rate Sky Financial would charge for similar loans at December 31, 2004 and 2003, applied over estimated payment periods; the estimated fair value for demand and savings
deposits was based on their carrying value; the estimated fair value for certificates of deposit and borrowings was based on estimates of the rate Sky Financial would pay on such obligations at December 31, 2004 and 2003, applied for the time period
until maturity. The fair value of interest rate swaps and caps represents the estimated amount the company would receive or pay to terminate the agreements, considering current interest rates, as well as the current creditworthiness of the
counterparties. The capital lease obligations of $726 and $1,117 at December 31, 2004 and 2003 are not included in the carrying amounts or the estimated fair value. The estimated fair value of commitments were not material.



While these estimates of fair values are based on managements judgment
of appropriate factors, there is no assurance that, if Sky Financial had disposed of such items at December 31, 2004 or 2003, the estimated fair values would necessarily have been achieved at that date, because market values may differ depending on
various circumstances. The estimated fair values at December 31, 2004 and 2003 should not necessarily be considered to apply at subsequent dates.



In addition, other assets and liabilities of Sky Financial that are not defined as financial instruments were excluded from the above disclosures, such as
mortgage servicing rights and life insurance contracts. In addition, non-financial instruments typically not recognized in financial statements (but which may have value) were not included in the above disclosures. These include, among other items,
the estimated earning power of core deposit accounts, the value of a trained work force, client goodwill and similar items.



Note 15Other Income and Other Operating Expense



The following is a summary of other income and other operating expense:



|                                      |  |      |        |      |   |        |  |   |       
|------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                      |  | 2004 |        | 2003 |   | 2002  
|Other Income                          |  |      |        |      |   |        |  |   |       
|Transaction fees                      |  | $    | 13,246 |      | $ | 10,506 |  | $ | 7,666 
|Merchant income                       |  |      | 6,929  |      |   | 4,572  |  |   | 3,559 
|Income from bank-owned life insurance |  |      | 6,249  |      |   | 6,484  |  |   | 5,817 
|International fees                    |  |      | 1,829  |      |   | 1,685  |  |   | 1,544 
|Other                                 |  |      | 13,686 |      |   | 11,707 |  |   | 13,467
|                                      |  |      |        |      |   |        |  |   |       
|Total other income                    |  | $    | 41,939 |      | $ | 34,954 |  | $ | 32,053
|                                      |  |      |        |      |   |        |  |   |       
|Other Operating Expense               |  |      |        |      |   |        |  |   |       
|State franchise taxes                 |  | $    | 3,255  |      | $ | 8,550  |  | $ | 3,365 
|Printing and supplies                 |  |      | 6,054  |      |   | 5,834  |  |   | 4,813 
|Legal and other professional fees     |  |      | 9,426  |      |   | 8,192  |  |   | 7,380 
|Telephone                             |  |      | 7,608  |      |   | 6,452  |  |   | 5,715 
|Loan costs                            |  |      | 7,827  |      |   | 7,106  |  |   | 4,794 
|Marketing                             |  |      | 11,269 |      |   | 9,034  |  |   | 5,782 
|Other                                 |  |      | 42,857 |      |   | 35,157 |  |   | 28,411
|                                      |  |      |        |      |   |        |  |   |       
|Total other operating expense         |  | $    | 88,296 |      | $ | 80,325 |  | $ | 60,260
|                                      |  |      |        |      |   |        |  |   |       



Note 16Merger, Integration and
Restructuring Expenses



In 2004, Sky Financial recorded merger, integration
and restructuring charges totaling $4,542 ($2,952 after tax or $.03 per diluted share). Merger, integration and restructuring charges of $3,597 ($2,338 after tax or $.02 per diluted share) related to the acquisition of Second Bancorp. Included are
data processing and conversion costs of $669, severance and other related employee costs of $839, and professional fees and other costs of $1,953 and lease and contract termination costs of $136. Costs of $786 ($511 after tax or $.01 per diluted
share) are related to the Prospect Bancshares acquisition. These charges consist of severance and other related employee costs of $89, data processing and conversion expense of $203, and professional fees and other costs of $494. The remaining $159
($103 after tax or $.00 per diluted share) of costs are primarily related to the divestiture of Sky Financial Solutions.



During 2004, a total of 323 positions were eliminated as part of acquisitions, which involved 304 positions from Second Bancorp and 19 positions from
Prospect Bancshares. Of this total, 139 accepted transfers to other positions, which consisted of 125 from Second Bancorp and 14 from Prospect Bancshares. Additionally, 40 from Second Bancorp and three from Prospect Bancshares accepted outside
employment. The remaining 139 from Second Bancorp and two from Prospect Bancshares were involuntarily terminated with severance.



In 2003, Sky Financial recorded merger, integration and restructuring charges totaling $4,577 ($2,975 after tax or $.03 per diluted share). Merger,
integration and restructuring charges of $1,091 ($710 after tax or $.01 per diluted share) relate to the acquisition of GLB. Included are data processing costs of $704, severance and other related employee costs of $287, and professional fees and
other costs of $100.



50



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##### Table of Contents

Note 16Merger, Integration and Restructuring Expenses (continued)



The remaining $3,486 ($2,265 after tax or $.02 per diluted share) of costs are related to
the Metropolitan acquisition. These charges consist of severance and other related employee costs of $1,930, data processing conversion expense of $13, lease and contract termination costs of $463, and professional fees and other costs of $1,080.
The balance of these costs were paid in 2004.



During 2003, a
total of 206 positions were eliminated as part of acquisitions, which involved 28 positions from GLB and 178 positions from Metropolitan Bank. Of this total, 44 accepted transfers to other positions, which consisted of 13 from GLB and 31 from
Metropolitan Bank. Additionally, 22 from Metropolitan accepted outside employment and 15 from GLB and 125 from Metropolitan were involuntarily terminated with severance.



In 2002, Sky Financial recorded merger, integration and restructuring charges totaling $10,437 ($6,784 after tax or $.08 per
diluted share), which consisted of $4,784 ($3,110 after tax or $.04 per diluted share) related to the acquisition of Three Rivers Bancorp and $5,653 ($3,674 after tax or $.04 per diluted share) related to Sky Financials implementation of a new
technology platform company-wide. Pre-tax merger, integration and restructuring costs incurred during 2002 for the Three Rivers acquisition included severance and other related employee costs of $2,005, conversion outsourcing costs of $405,
transaction costs of $233, lease termination costs of $203, marketing and communication expenses of $150 and other merger and integration-related costs of $1,788. Through 2004, approximately $10,073 of these charges were paid, with the remaining
charges to be settled during 2005.



Pre-tax merger, integration
and restructuring costs incurred during 2002 for Sky Financials new technology platform implementation included severance and other related employee costs of $1,663, valuation adjustments of property, equipment and other assets of $851,
marketing and communication expenses of $500, lease termination costs of $676 and other merger and integration-related costs of $1,963. All costs were paid during 2002.



During 2002, 169 positions were eliminated as part of the integration of Three Rivers Bancorp and the new technology
platform and processes implementation. Of this total, 18 accepted transfers to other positions, 13 accepted outside employment and 138 were involuntarily terminated with severance.



The following is a summary of category activity in the merger, integration and restructuring liabilities for 2004 and 2003.



|                                  |  |                                   |        |   |                  |   |      |                           |  |   |                                |   |  |       |        |   |  |   |         |  
|--------------------------------- |  | --------------------------------- | ------ | - | ---------------- | - | ---- | ------------------------- |  | - | ------------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                  |  | Employee Severanceand Termination |        |   | Conversion Costs |   |      | Lease/ContractTermination |  |   | Professional Fees/ Other Costs |   |  | Total |       
|Balance as of January 1, 2003     |  | $                                 | 2,679  |   |                  | $ | 15   |                           |  | $ | 686                            |   |  | $     | 2,401  |   |  | $ | 5,781   |  
|Accruals charged to expense       |  |                                   | 2,217  |   |                  |   | 717  |                           |  |   | 462                            |   |  |       | 1,181  |   |  |   | 4,577   |  
|Accruals from purchase accounting |  |                                   | 2,985  |   |                  |   |     |                           |  |   | 2,442                          |   |  |       | 1,285  |   |  |   | 6,712   |  
|Cash payments                     |  |                                   | (6,674 | ) |                  |   | (674 | )                         |  |   | (2,970                         | ) |  |       | (4,229 | ) |  |   | (14,547 | )
|                                  |  |                                   |        |   |                  |   |      |                           |  |   |                                |   |  |       |        |   |  |   |         |  
|Balance as of December 31, 2003   |  |                                   | 1,207  |   |                  |   | 58   |                           |  |   | 620                            |   |  |       | 638    |   |  |   | 2,523   |  
|Accruals charged to expense       |  |                                   | 1,300  |   |                  |   | 872  |                           |  |   | (290                           | ) |  |       | 2,660  |   |  |   | 4,542   |  
|Accruals from purchase accounting |  |                                   | 3,914  |   |                  |   |     |                           |  |   | 1,469                          |   |  |       | 1,382  |   |  |   | 6,765   |  
|Cash payments                     |  |                                   | (3,917 | ) |                  |   | (930 | )                         |  |   | (1,109                         | ) |  |       | (4,550 | ) |  |   | (10,506 | )
|                                  |  |                                   |        |   |                  |   |      |                           |  |   |                                |   |  |       |        |   |  |   |         |  
|Balance as of December 31, 2004   |  | $                                 | 2,504  |   |                  | $ |     |                           |  | $ | 690                            |   |  | $     | 130    |   |  | $ | 3,324   |  
|                                  |  |                                   |        |   |                  |   |      |                           |  |   |                                |   |  |       |        |   |  |   |         |  



Note 17Employee Benefits



Sky Financial maintains two plans, Employee Stock Ownership and Savings Plan
and Employee Stock Ownership Pension Plan as its primary ongoing retirement plans, as well as a supplemental retirement plan for certain individuals.



Employee Stock Ownership and Savings Plan



The plan provides for contributions by Sky Financial as determined on a year-by-year basis. These contributions were 4%, 5% and 6% of eligible employee compensation in
2004, 2003 and 2002, respectively. Under the 401(k) portion of the Plan, employees may contribute a percentage of their eligible compensation with a company match of such contributions up to a maximum match of 4%. Employees may contribute to this
plan upon employment. Employer matching contributions commence after the employees have completed twelve months of service. Expenses related to this plan were $3,981, $4,788 and $4,851 in 2004, 2003 and 2002.



Employee Stock Ownership Pension Plan



Sky Financial also sponsors an Employee Stock Ownership Pension Plan that provides for an
annual employer contribution equal to 3% of eligible employees annual compensation. Expenses related to this plan were $2,986, $2,873 and $2,587 in 2004, 2003 and 2002, respectively.





Total shares of Sky Financial common stock held by the Employee Stock Ownership and Savings Plan and the Employee Stock Ownership Pension Plan as of December 31, 2004 were 3,236.



Supplemental Retirement Plan



This plan replaces retirement benefits eliminated under Sky Financials qualified retirement plans because of eligible compensation limitations under current tax
law. Sky Financials contribution under the plan is determined by multiplying the excess of employees eligible compensation over the established limitation by the contribution level established by the Board of Directors for Sky
Financials qualified plans.



The contribution rates were
11%, 12% and 12% in 2004, 2003 and 2002, respectively. Expenses related to this plan were $306, $245 and $229 in 2004, 2003 and 2002.



51



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 17Employee Benefits (continued)



Frozen Pension Plans



In connection with Sky Financials
acquisition of Second National and Three Rivers, Sky Financial sponsors two funded, defined benefit pension plans for eligible employees who are 21 years of age with one or more years of service. The Second National plan was frozen during the fourth
quarter of 2004. Because this was contemplated in the Second National acquisition, a curtailment gain was considered in arriving at the benefit obligation and prepaid pension cost recorded at the acquisition date. Sky Financial expects to make
contributions of $179 to the plan in 2005. Benefits paid to retirees are based on age at retirement, years of credited service and average compensation. The Three Rivers plan was frozen during the fourth quarter of 2002. Because this was
contemplated in the Three Rivers acquisition, a curtailment gain was considered in arriving at the benefit obligation and prepaid pension cost recorded at the acquisition date. Sky Financial does not expect to make any contributions to the plan in
2005. The following table sets forth the benefit obligation, fair value of plan assets and the funded status of Sky Financials plans; amounts recognized in Sky Financials financial statements; and the principal weighted average
assumptions used at December 31, 2004 and 2003:



|                                                     |  |      |        |   |      |   |        |  
|---------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                     |  | 2004 |        |   | 2003 |  
|Change in Benefit Obligation                         |  |      |        |   |      |   |        |  
|Benefit obligation at beginning of period            |  | $    | 5,027  |   |      | $ | 5,785  |  
|Service cost                                         |  |      | 508    |   |      |   |       |  
|Interest cost                                        |  |      | 864    |   |      |   | 382    |  
|Acquisitions                                         |  |      | 18,073 |   |      |   |       |  
|Benefits paid                                        |  |      | (996   | ) |      |   | (2,148 | )
|Expected expenses                                    |  |      | (39    | ) |      |   |       |  
|Actuarial loss                                       |  |      | 1,663  |   |      |   | 1,008  |  
|                                                     |  |      |        |   |      |   |        |  
|Benefit obligation at end of period                  |  | $    | 25,100 |   |      | $ | 5,027  |  
|                                                     |  |      |        |   |      |   |        |  
|Change in Plan Assets                                |  |      |        |   |      |   |        |  
|Fair value of plan assets at beginning of period     |  | $    | 5,363  |   |      | $ | 5,940  |  
|Actual return on plan assets, net of expenses        |  |      | 1,363  |   |      |   | 802    |  
|Acquisitions                                         |  |      | 15,325 |   |      |   |       |  
|Employer contributions                               |  |      | 90     |   |      |   | 769    |  
|Benefits paid                                        |  |      | (996   | ) |      |   | (2,148 | )
|Expected expenses                                    |  |      | (39    | ) |      |   |       |  
|                                                     |  |      |        |   |      |   |        |  
|Fair value of plan assets at end of period           |  | $    | 21,106 |   |      | $ | 5,363  |  
|                                                     |  |      |        |   |      |   |        |  
|Reconciliation of funded status                      |  |      |        |   |      |   |        |  
|Funded Status                                        |  | $    | (3,994 | ) |      | $ | 336    |  
|Unrecognized actuarial loss                          |  |      | 1,835  |   |      |   | 414    |  
|                                                     |  |      |        |   |      |   |        |  
|Accrued benefit cost                                 |  | $    | (2,159 | ) |      | $ | 750    |  
|                                                     |  |      |        |   |      |   |        |  
|Amounts Recognized in the Consolidated Balance Sheet |  |      |        |   |      |   |        |  
|Prepaid benefit cost                                 |  | $    | 826    |   |      | $ | 750    |  
|Accrued benefit liability                            |  |      | (2,985 | ) |      |   |       |  
|                                                     |  |      |        |   |      |   |        |  
|Net amount recognized                                |  | $    | (2,159 | ) |      | $ | 750    |  
|                                                     |  |      |        |   |      |   |        |  
|Components of Net Periodic Benefit Cost              |  |      |        |   |      |   |        |  
|Service cost                                         |  | $    | 508    |   |      | $ |       |  
|Interest cost                                        |  |      | 864    |   |      |   | 382    |  
|Expected return on plan assets                       |  |      | (1,105 | ) |      |   | (426   | )
|Recognized actuarial (gain)                          |  |      | (15    | ) |      |   |       |  
|                                                     |  |      |        |   |      |   |        |  
|Net periodic benefit cost                            |  | $    | 252    |   |      | $ | (44    | )
|                                                     |  |      |        |   |      |   |        |  
|Weighted-average assumptions at December 31          |  |      |        |   |      |   |        |  
|Discount rate                                        |  |      | 5.90   | % |      |   | 6.25   | %
|Expected return on assets                            |  |      | 8.00   |   |      |   | 8.00   |  



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##### Table of Contents

Note 17Employee Benefits (continued)



The accumulated benefit obligations were approximately $25,100 and $5,027 at December 31, 2004 and 2003, respectively.



The following table provides information for pension plans
with an accumulated benefit obligation and projected benefit obligation in excess of plan assets:



|                                         |  |      |        |      |    
|---------------------------------------- |  | ---- | ------ | ---- | ---
|                                         |  | 2004 |        | 2003
|Projected benefit obligations            |  | $    | 19,682 |      | N/A
|Accumulated benefit obligations          |  |      | 19,682 |      | N/A
|Fair value of plan assets at end of year |  |      | 15,835 |      | N/A



Sky Financial expects
to make the following benefit payments, which reflect expected future service:



|                  |  |                  |      
|----------------- |  | ---------------- | -----
|Year              |  | Pension Benefits
|2005              |  | $                | 938  
|2006              |  |                  | 932  
|2007              |  |                  | 1,152
|2008              |  |                  | 1,183
|2009              |  |                  | 1,158
|2010 through 2014 |  |                  | 7,287



The expected long-term
rate of return on the Plans assets reflects the average rate of earnings expected on the funds invested by each plan to provide for plan benefits. Management considers the long-term historical returns of the assets within the portfolio and
adjusts the rate, as necessary, for expected future returns on the assets in the plans in determining the rate.



The Plans asset allocations at December 31, 2004 by asset category are as follows:



|                  |  |                   |   |  |                                |  
|----------------- |  | ----------------- | - |  | ------------------------------ | -
|                  |  | Target Allocation |   |  | Percent of Pension Plan Assets |  
|Equity securities |  | 60                | % |  | 61                             | %
|Debt securities   |  | 40                |   |  | 31                             |  
|Cash              |  |                  |   |  | 8                              |  
|                  |  |                   |   |  |                                |  
|Total             |  | 100               | % |  | 100                            | %
|                  |  |                   |   |  |                                |  



Managements
investment allocation is managed to provide an acceptable level of return to fund future benefit payments as well as provide liquidity to pay current benefits while minimizing the overall market risk to the plans.



Management believes that its current investment allocation meets these goals
and does not anticipate significant changes to the investment allocation in the near future. Management has provided the external investment managers with general guidelines for them to make decisions regarding the nature and timing of investment
decisions. The investment policy does not allow for significant changes in previously approved investments or in the use of derivatives in the investment strategy.



Other Plans of Merged Affiliates



Sky Financial, as part of its overall employee benefits design, settles plans of merged affiliates through consolidation into existing plans or termination of the plan.
Sky sponsored two 401(k) plans as the result of its 2004 acquisitions of Second National Bank and Prospect Bank. These plans were merged into Skys Profit Sharing, 401(k) and ESOP Plan in January of 2005. Sky also sponsored three 401(k) plans
as a result of prior acquisitions of Pennsylvania Capital Bank, Eastern Ohio Benefits and Meyer and Eckenrode. Eastern Ohio Benefits and Meyer and Eckenrode were merged into Skys Profit Sharing, 401(k) and ESOP Plan in January of 2005.
Pennsylvania Capital Bank will be terminated or merged into Skys Profit Sharing, 401(k) and ESOP Plan during 2005. On April 1, 2004, Spencer-Pattersons 401(k) plan was merged into Skys Profit Sharing, 401(k) and ESOP Plan. In 2004,
Sky merged the Metropolitan and GLB 401(k) plans into Skys ESOP plan. In 2002, Sky merged the Citizens Employee Stock Ownership Plan into Skys ESOP plan.



Sky Financial pays health insurance premiums for certain employees after retirement. Sky Financial accrues the costs of
retirees health and other post-retirement benefits during the working career of active employees. The expense and liability under this plan are not material in any period presented.



Note 18Stock Options



Options to purchase Sky Financials stock have been granted to directors, officers and employees under various stock option plans. The Sky Financial Group, Inc. 2002
Stock Option and Stock Appreciation Rights Plan was approved by Sky Financials shareholders in 2002. Under the 2002 plan, options may be granted to purchase a maximum of 2.0 million common shares, or 2.5% of the number of issued and
outstanding common shares at the time of adoption of the plan, adjusted for all subsequent stock dividends, splits and stock-for-stock acquisitions.



The Sky Financial Group, Inc. 1998 Stock Option Plan for Employees and the Amended and Restated Sky Financial Group, Inc. 1998 Stock Option Plan for
Directors were approved by Sky Financials shareholders in 1998. Under these plans, options may be granted to purchase a maximum of 6.5 million common shares, or 7.5% of the number of issued and outstanding common shares at the time of the
adoption of the plans, adjusted for all subsequent stock dividends, splits and stock-for-stock acquisitions.



Under both the 2002 and 1998 plans, options expire 10 years after the date of grant and are issued at an option price no less than the market price of Sky
Financials stock on the date of grant. Certain individuals, including directors, may also elect to receive options, determined under a formula, in lieu of a portion of their salary or director fees, as applicable. Options granted to directors
are fully vested and immediately exercisable at the time of grant. Options granted to officers and other key employees are generally exercisable at 40% after two years and in annual 20% increments thereafter, except for options received in lieu of
salary, which are immediately exercisable.



The Sky Financial
Group, Inc. 2004 Restricted Stock Plan was approved by Sky Financials shareholders in 2004. Under this plan, a total of 800 thousand of authorized, but unissued shares of common stock shall be available.



53



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Notes to Consolidated Financial Statements



(Dollars and shares in thousands, except per share data)



Note 18Stock Options (continued)



A summary of the activity in the plans is as follows:



|                                                           |  |        |   |      |                              |       |        |       |   |                              |   |        |  |       |                              |  |   |      
|---------------------------------------------------------- |  | ------ | - | ---- | ---------------------------- | ----- | ------ | ----- | - | ---------------------------- | - | ------ |  | ----- | ---------------------------- |  | - | -----
|                                                           |  | 2004   |   | 2003 |                              | 2002 
|                                                           |  | Shares |   |      | WeightedAverageExercisePrice |       | Shares |       |   | WeightedAverageExercisePrice |   | Shares |  |       | WeightedAverageExercisePrice
|Outstanding at beginning of year                           |  | 6,802  |   |      | $                            | 18.82 |        | 6,463 |   |                              | $ | 18.47  |  | 5,818 |                              |  | $ | 17.36
|Granted                                                    |  | 1,344  |   |      |                              | 25.45 |        | 1,155 |   |                              |   | 19.85  |  | 1,178 |                              |  |   | 21.70
|Exercised                                                  |  | (907   | ) |      |                              | 15.52 |        | (650  | ) |                              |   | 23.38  |  | (395  | )                            |  |   | 11.49
|Forfeited                                                  |  | (108   | ) |      |                              | 21.52 |        | (166  | ) |                              |   | 20.46  |  | (138  | )                            |  |   | 19.58
|                                                           |  |        |   |      |                              |       |        |       |   |                              |   |        |  |       |                              |  |   |      
|Outstanding at end of year                                 |  | 7,131  |   |      |                              | 20.45 |        | 6,802 |   |                              |   | 18.82  |  | 6,463 |                              |  |   | 18.47
|                                                           |  |        |   |      |                              |       |        |       |   |                              |   |        |  |       |                              |  |   |      
|Options exercisable at end of year                         |  | 4,870  |   |      |                              | 19.78 |        | 4,818 |   |                              |   | 18.52  |  | 4,641 |                              |  |   | 18.21
|Weighted average fair value of options granted during year |  |        |   |      | $                            | 4.80  |        |       |   |                              | $ | 3.49   |  |       |                              |  | $ | 5.55 



Options outstanding at year-end 2004
were as follows:



|                         |        |             |                                                   |             |        |       |                                |   |      
|------------------------ | ------ | ----------- | ------------------------------------------------- | ----------- | ------ | ----- | ------------------------------ | - | -----
|Range of Exercise Prices |        | Outstanding |                                                   | Exercisable
|                         | Number |             | Weighted AverageRemaining ContractualLife (Years) |             | Number |       | Weighted AverageExercise Price
|$3 to $10                |        | 54          |                                                   | 0.30        |        | 54    |                                | $ | 8.94 
|$10 to $15               |        | 250         |                                                   | 1.60        |        | 249   |                                |   | 13.62
|$15 to $20               |        | 3,243       |                                                   | 6.37        |        | 2,216 |                                |   | 17.50
|$20 to $25               |        | 2,214       |                                                   | 5.59        |        | 1,847 |                                |   | 22.10
|$25 to $30               |        | 1,370       |                                                   | 8.86        |        | 504   |                                |   | 25.55
|                         |        |             |                                                   |             |        |       |                                |   |      
|Outstanding at year-end  |        | 7,131       |                                                   | 6.39        |        | 4,870 |                                | $ | 19.78
|                         |        |             |                                                   |             |        |       |                                |   |      



Sky Financial maintains a Stock
Appreciation Rights (SAR) plan under which SARs were granted in tandem with stock options until 1998. Expense related to the SARs was $72 in 2004, $101 in 2003 and $(75) in 2002.



Note 19Other Financial Instruments



Credit Commitments and Letters of Credit



Sky Financial is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its clients located
primarily within its local business areas. These instruments include commitments to extend credit, standby letters of credit and international commercial letters of credit.



Sky Financials exposure to credit loss in the event of non-performance by the other party to the financial instrument
for commitments to extend credit, standby letters of credit and letters of credit is represented by the contractual amount of those instruments. Sky Financial uses the same credit policies in making commitments and conditional obligations as it does
in extending loans to clients.



Financial instruments whose
contract amounts represent credit risk at December 31 are presented below:



|                             |  |      |           |      |   |          
|---------------------------- |  | ---- | --------- | ---- | - | ---------
|                             |  | 2004 |           | 2003
|Commitments to extend credit |  | $    | 2,981,831 |      | $ | 2,320,451
|Standby letters of credit    |  |      | 343,130   |      |   | 331,082  
|Letters of credit            |  |      | 7,173     |      |   | 2,124    



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##### Table of Contents

Note 19Other Financial Instruments (continued)



The majority of the unfunded commitments at December 31, 2004 and 2003 are variable rate commitments, with approximately 22%
or $721,000 and 28% or $733,000 having fixed rates in 2004 and 2003, respectively.



Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates ranging from one to five
years, variable interest rates tied to the prime rate and U.S. Treasury bill rates and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.



Standby letters of credit
are conditional commitments issued by Sky Financial to guarantee the performance of a client to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including bond financing and similar
transactions. The expiration date of substantially all standby letters of credit extend for a period ranging from thirty days to seven years.



The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to clients. Sky
Financial holds marketable securities, certificates of deposits, real estate, inventory and equipment as collateral supporting those commitments for which collateral is deemed necessary.



Letters of credit are instruments used to facilitate trade, most commonly international trade, by substituting Sky
Financials credit for that of a commercial importing company. The terms are generally one to three months. The letters of credit are primarily unsecured.



Note 20Mortgage Banking Activities



Sky Financial conducts mortgage banking operations through its banking subsidiary. The primary activity relates to the origination and sale of fixed and variable rate
residential mortgages in the secondary market. Sky Financial normally retains the servicing of the loans it sells. Loans are primarily originated in Sky Financials community banking market areas of Ohio, Pennsylvania, Michigan, Indiana and
West Virginia.



Mortgage banking income, a component of
non-interest income, includes gain on sales of loans held for sale during 2004, 2003 and 2002 of $25,572, $54,280 and $34,674, respectively.



The following table summarizes information relating to Sky Financials mortgage banking activity as of December 31:



|                                                                  |  |      |           |   |      |   |           |  
|----------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                  |  | 2004 |           |   | 2003 |  
|Amounts held in agency accounts                                   |  | $    | 14,569    |   |      | $ | 15,644    |  
|Amounts held in escrow accounts                                   |  |      | 35,188    |   |      |   | 29,599    |  
|Mortgage banking receivables for advanced funds                   |  |      | 4,202     |   |      |   | 1,996     |  
|Unpaid mortgage loan principal for loans serviced for investors   |  |      | 6,069,286 |   |      |   | 4,913,013 |  
|Mortgage servicing rights, net of accumulated amortization        |  |      | 40,680    |   |      |   | 29,325    |  
|Allowance for impairment of capitalized mortgage servicing rights |  |      | (1,026    | ) |      |   | (183      | )
|                                                                  |  |      |           |   |      |   |           |  
|Net mortgage servicing rights                                     |  | $    | 39,654    |   |      | $ | 29,142    |  
|                                                                  |  |      |           |   |      |   |           |  



In 2004, Sky Financial
sold certain servicing rights on mortgages that had an outstanding principal balance of $388,398 and realized a net gain of approximately $1,020 on the sale. In 2003 and 2002, Sky Financial sold certain servicing rights on mortgages that had an
outstanding principal balance of $20,682 and $16,967, respectively, and realized no gain or loss. At December 31, 2004, Sky Financial had firm commitments for the sale of approximately $38,931 of mortgage loans. The fair value of these commitments
is not material.



Mortgage Servicing Rights:



|                                |  |      |         |   |      |   |         |  
|------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                |  | 2004 |         |   | 2003 |  
|Balance at beginning of year    |  | $    | 29,142  |   |      | $ | 17,029  |  
|Originations                    |  |      | 16,673  |   |      |   | 18,571  |  
|Acquired in acquisitions        |  |      | 9,947   |   |      |   | 10,758  |  
|Amortization                    |  |      | (15,265 | ) |      |   | (19,495 | )
|Impairment (charges) recoveries |  |      | (843    | ) |      |   | 2,279   |  
|                                |  |      |         |   |      |   |         |  
|Carrying value at end of year   |  | $    | 39,654  |   |      | $ | 29,142  |  
|                                |  |      |         |   |      |   |         |  
|Fair value at end of year       |  | $    | 46,623  |   |      | $ | 36,770  |  
|                                |  |      |         |   |      |   |         |  



Impairment Reserve:



|                                |  |      |       |      |   |        |  
|------------------------------- |  | ---- | ----- | ---- | - | ------ | -
|                                |  | 2004 |       | 2003 |  
|Balance at beginning of year    |  | $    | 183   |      | $ | 2,462  |  
|Impairment charges (recoveries) |  |      | 843   |      |   | (2,279 | )
|                                |  |      |       |      |   |        |  
|Balance at end of year          |  | $    | 1,026 |      | $ | 183    |  
|                                |  |      |       |      |   |        |  



Key economic
assumptions used in measuring the value of mortgage servicing rights in 2004 and 2003 were as follows:



|                                          |  |       |   |  |       |  
|----------------------------------------- |  | ----- | - |  | ----- | -
|                                          |  | 2004  |   |  | 2003  |  
|Weighted-average constant prepayment rate |  | 17.61 | % |  | 18.78 | %
|Weighted-average life (in years)          |  | 6.3   |   |  | 5.7   |  
|Weighted-average discount rate            |  | 11.00 | % |  | 11.79 | %





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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 21Regulatory Matters



Capital Maintenance Requirements



Sky Financial and Sky Bank must observe capital guidelines established by federal and state regulatory authorities. Failure to meet specified minimum capital requirements
can result in certain mandatory actions by primary regulators of Sky Financial and Sky Bank that could have a material effect on Sky Financials financial condition or results of operations. Under capital adequacy guidelines, Sky Financial and
Sky Bank must meet specific quantitative measures of their assets, liabilities and certain off-balance-sheet items as determined under regulatory accounting practices. Sky Financials and Sky Banks capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believes, as of December 31, 2004, that Sky Financial and Sky Bank meet all capital adequacy requirements to which they are
subject.



Sky Financial and Sky Bank have been notified by
their respective regulators that, as of the most recent regulatory examinations, each is regarded as well-capitalized under the regulatory framework for prompt corrective action. Such determinations have been made evaluating Sky Financial and Sky
Bank under Tier 1, total capital and leverage ratios. There are no conditions or events since these notifications that management believes have changed any of the well-capitalized categorizations of Sky Financial and Sky Bank.



Sky Financial and Sky Banks capital ratios are presented in the
following table:



|                                       |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|-------------------------------------- |  | ------ | --------- | ----- | -------------------------------------------- | - | ------ | ------------------------------------------------------------------------ | ------- |  | --- | ------ |  | ----- | --------- |  | ---- | -
|                                       |  | Actual |           |       | Minimum Requiredfor CapitalAdequacy Purposes |   |        | Required to be Well-CapitalizedUnder Prompt CorrectiveAction Regulations |        
|                                       |  | Amount |           | Ratio |                                              |   | Amount |                                                                          | Ratio   |  |     | Amount |  | Ratio |          
|December 31, 2004                      |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Total capital to risk-weighted assets  |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,386,672 |       | 11.7                                         | % |        | $                                                                        | 946,057 |  | 8.0 | %      |  | $     | 1,182,571 |  | 10.0 | %
|Sky Bank                               |  |        | 1,247,822 |       | 10.8                                         |   |        |                                                                          | 920,487 |  | 8.0 |        |  |       | 1,150,608 |  | 10.0 |  
|                                       |  |        |           |       |                                              |  
|Tier 1 capital to risk-weighted assets |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,096,089 |       | 9.3                                          | % |        | $                                                                        | 473,028 |  | 4.0 | %      |  | $     | 709,542   |  | 6.0  | %
|Sky Bank                               |  |        | 1,027,903 |       | 8.9                                          |   |        |                                                                          | 460,243 |  | 4.0 |        |  |       | 690,365   |  | 6.0  |  
|                                       |  |        |           |       |                                              |  
|Tier 1 capital to average assets       |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,096,089 |       | 7.7                                          | % |        | $                                                                        | 567,992 |  | 4.0 | %      |  | $     | 709,991   |  | 5.0  | %
|Sky Bank                               |  |        | 1,027,903 |       | 7.3                                          |   |        |                                                                          | 561,811 |  | 4.0 |        |  |       | 702,264   |  | 5.0  |  
|                                       |  |        |           |       |                                              |  
|December 31, 2003                      |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Total capital to risk-weighted assets  |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,194,121 |       | 11.8                                         | % |        | $                                                                        | 807,852 |  | 8.0 | %      |  | $     | 1,009,815 |  | 10.0 | %
|Sky Bank                               |  |        | 1,009,529 |       | 11.2                                         |   |        |                                                                          | 723,302 |  | 8.0 |        |  |       | 904,127   |  | 10.0 |  
|                                       |  |        |           |       |                                              |  
|Tier 1 capital to risk-weighted assets |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 908,756   |       | 9.0                                          | % |        | $                                                                        | 403,926 |  | 4.0 | %      |  | $     | 605,889   |  | 6.0  | %
|Sky Bank                               |  |        | 820,683   |       | 9.1                                          |   |        |                                                                          | 361,651 |  | 4.0 |        |  |       | 542,476   |  | 6.0  |  
|                                       |  |        |           |       |                                              |  
|Tier 1 capital to average assets       |  |        |           |       |                                              |   |        |                                                                          |         |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 908,756   |       | 7.3                                          | % |        | $                                                                        | 500,565 |  | 4.0 | %      |  | $     | 625,707   |  | 5.0  | %
|Sky Bank                               |  |        | 820,083   |       | 7.1                                          |   |        |                                                                          | 460,498 |  | 4.0 |        |  |       | 575,622   |  | 5.0  |  



Restrictions on Subsidiary
Dividends



Dividends paid by Sky Financial are mainly provided for by
dividends from its subsidiaries. However, certain restrictions exist regarding the ability of Sky Bank to transfer funds to Sky Financial in the form of cash dividends, loans or advances.



Regulatory approval is required in order to pay dividends in excess of Sky Banks earnings retained for the current
year plus retained net profits since January 1, 2002. As of December 31, 2004, $51,608 was available for distribution to Sky Financial as dividends without prior regulatory approval.



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Note 22Line of Business Reporting



Sky Financial manages and operates two major lines of business: community banking and financial service affiliates. Community banking
includes lending and related services to businesses and consumers, mortgage banking and deposit-gathering. Financial service affiliates consist of non-banking companies currently engaged in trust services, insurance and other related services.



The reported line of business results reflect the underlying
operating performance within the business units. Parent and Other is comprised of the parent company and several smaller business units. It includes the net funding cost of the parent company, intercompany eliminations and all merger, integration
and restructuring expenses. Expenses for centrally-provided services and support are fully allocated based principally upon estimated usage of services.



Selected segment information is included in the following table:



|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|------------------------------------------------------------ |  | ---------------- | ---------- | - | --------------------------- | - | ------ | --------------- |  | - | ----------------- | - |  | - | ----------
|                                                             |  | CommunityBanking |            |   | Financial ServiceAffiliates |   |        | Parent andOther |  |   | ConsolidatedTotal
|2004                                                         |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net interest income                                          |  | $                | 454,494    |   |                             | $ | 567    |                 |  | $ | (3,750            | ) |  | $ | 451,311   
|Provision for credit losses                                  |  |                  | 37,425     |   |                             |   | 235    |                 |  |   |                  |   |  |   | 37,660    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net interest income after provision                          |  |                  | 417,069    |   |                             |   | 332    |                 |  |   | (3,750            | ) |  |   | 413,651   
|Non-interest income                                          |  |                  | 124,277    |   |                             |   | 70,184 |                 |  |   | 8,956             |   |  |   | 203,417   
|Non-interest expense                                         |  |                  | 293,884    |   |                             |   | 53,731 |                 |  |   | 8,909             |   |  |   | 356,524   
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Income (loss) from continuing operations before income taxes |  |                  | 247,462    |   |                             |   | 16,785 |                 |  |   | (3,703            | ) |  |   | 260,544   
|Income tax expense (benefit) from continuing operations      |  |                  | 83,196     |   |                             |   | 7,011  |                 |  |   | (4,863            | ) |  |   | 85,344    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net income from continuing operations                        |  | $                | 164,266    |   |                             | $ | 9,774  |                 |  | $ | 1,160             |   |  | $ | 175,200   
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Intersegment revenues (expense)                              |  | $                | (25,243    | ) |                             | $ | (2,360 | )               |  | $ | 27,603            |   |  | $ |          
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Average assets                                               |  | $                | 13,132,668 |   |                             | $ | 95,900 |                 |  | $ | 131,988           |   |  | $ | 13,360,556
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Depreciation and amortization                                |  | $                | 29,861     |   |                             | $ | 1,120  |                 |  | $ | 965               |   |  | $ | 31,946    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|2003                                                         |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net interest income                                          |  | $                | 393,307    |   |                             | $ | 389    |                 |  | $ | (2,453            | ) |  | $ | 391,243   
|Provision for credit losses                                  |  |                  | 33,225     |   |                             |   | 900    |                 |  |   |                  |   |  |   | 34,125    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net interest income after provision                          |  |                  | 360,082    |   |                             |   | (511   | )               |  |   | (2,453            | ) |  |   | 357,118   
|Non-interest income                                          |  |                  | 121,324    |   |                             |   | 53,637 |                 |  |   | 3,937             |   |  |   | 178,898   
|Non-interest expense                                         |  |                  | 248,708    |   |                             |   | 43,416 |                 |  |   | 15,062            |   |  |   | 307,186   
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Income (loss) from continuing operations before income taxes |  |                  | 232,698    |   |                             |   | 9,710  |                 |  |   | (13,578           | ) |  |   | 228,830   
|Income tax expense (benefit) from continuing operations      |  |                  | 78,408     |   |                             |   | 4,427  |                 |  |   | (6,685            | ) |  |   | 76,150    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net income (loss) from continuing operations                 |  | $                | 154,290    |   |                             | $ | 5,283  |                 |  | $ | (6,893            | ) |  | $ | 152,680   
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Intersegment revenues (expense)                              |  | $                | (13,892    | ) |                             | $ | (1,422 | )               |  | $ | 15,314            |   |  | $ |          
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Average assets                                               |  | $                | 11,196,405 |   |                             | $ | 76,005 |                 |  | $ | 156,861           |   |  | $ | 11,429,271
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Depreciation and amortization                                |  | $                | 20,385     |   |                             | $ | 878    |                 |  | $ | 732               |   |  | $ | 21,995    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|2002                                                         |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net interest income                                          |  | $                | 344,664    |   |                             | $ | 772    |                 |  | $ | (4,201            | ) |  | $ | 341,235   
|Provision for credit losses                                  |  |                  | 36,579     |   |                             |   | 1,080  |                 |  |   |                  |   |  |   | 37,659    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net interest income after provision                          |  |                  | 308,085    |   |                             |   | (308   | )               |  |   | (4,201            | ) |  |   | 303,576   
|Non-interest income                                          |  |                  | 96,981     |   |                             |   | 48,859 |                 |  |   | 2,144             |   |  |   | 147,984   
|Non-interest expense                                         |  |                  | 206,530    |   |                             |   | 40,429 |                 |  |   | 6,741             |   |  |   | 253,700   
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Income (loss) from continuing operations before income taxes |  |                  | 198,536    |   |                             |   | 8,122  |                 |  |   | (8,798            | ) |  |   | 197,860   
|Income tax expense (benefit) from continuing operations      |  |                  | 66,360     |   |                             |   | 3,239  |                 |  |   | (3,887            | ) |  |   | 65,712    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Net income (loss) from continuing operations                 |  | $                | 132,176    |   |                             | $ | 4,883  |                 |  | $ | (4,911            | ) |  | $ | 132,148   
|Intersegment revenues (expense)                              |  | $                | (26,834    | ) |                             | $ | (1,428 | )               |  | $ | 28,262            |   |  | $ |          
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Average assets                                               |  | $                | 9,216,294  |   |                             | $ | 73,618 |                 |  | $ | 131,654           |   |  | $ | 9,421,566 
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           
|Depreciation and amortization                                |  | $                | 13,410     |   |                             | $ | 778    |                 |  | $ | 1,599             |   |  | $ | 15,787    
|                                                             |  |                  |            |   |                             |   |        |                 |  |   |                   |   |  |   |           





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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 23Condensed Parent Company Financial Information



Condensed Parent Company Balance Sheets



|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|December 31,                                                                      |  |      |         |   | 2004 |   |           | 2003 | 
|Assets                                                                            |  |      |         |   |      |   |           |      |  |   |           |  
|Cash and due from banks                                                           |  |      |         |   |      | $ | 94,920    |      |  | $ | 32,704    |  
|Securities available for sale                                                     |  |      |         |   |      |   | 30,460    |      |  |   | 34,638    |  
|Investment in bank subsidiaries                                                   |  |      |         |   |      |   | 1,421,439 |      |  |   | 942,680   |  
|Investment in non-bank subsidiaries                                               |  |      |         |   |      |   | 244,910   |      |  |   | 272,844   |  
|Receivable from subsidiaries                                                      |  |      |         |   |      |   | 18,208    |      |  |   | 70,687    |  
|Premises and equipment                                                            |  |      |         |   |      |   | 7,144     |      |  |   | 7,339     |  
|Other assets                                                                      |  |      |         |   |      |   | 60,090    |      |  |   | 69,620    |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Total assets                                                                      |  |      |         |   |      | $ | 1,877,171 |      |  | $ | 1,430,512 |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Liabilities                                                                       |  |      |         |   |      |   |           |      |  |   |           |  
|Debt                                                                              |  |      |         |   |      | $ | 289,558   |      |  | $ | 325,805   |  
|Other liabilities                                                                 |  |      |         |   |      |   | 116,658   |      |  |   | 106,131   |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Total liabilities                                                                 |  |      |         |   |      |   | 406,216   |      |  |   | 431,936   |  
|Shareholders Equity                                                              |  |      |         |   |      |   | 1,470,955 |      |  |   | 998,576   |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Total liabilities and shareholders equity                                        |  |      |         |   |      | $ | 1,877,171 |      |  | $ | 1,430,512 |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Condensed Parent Company
Statements of Income                                     |  |      |         |   |      |   |           |      |  |   |           |  
|                                                                                  |  |      |        
|For years ended December 31,                                                      |  | 2004 |         |   | 2003 |   |           | 2002 | 
|Income                                                                            |  |      |         |   |      |   |           |      |  |   |           |  
|Dividends from bank subsidiaries                                                  |  | $    | 88,000  |   |      | $ | 80,000    |      |  | $ | 190,000   |  
|Dividends from non-bank subsidiaries                                              |  |      | 14,055  |   |      |   | 6,855     |      |  |   |          |  
|Management fees                                                                   |  |      | 26,998  |   |      |   | 14,252    |      |  |   | 18,512    |  
|Other income                                                                      |  |      | 10,866  |   |      |   | 7,227     |      |  |   | 9,341     |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Total income                                                                      |  |      | 139,919 |   |      |   | 108,334   |      |  |   | 217,853   |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Expenses                                                                          |  |      |         |   |      |   |           |      |  |   |           |  
|Interest expense                                                                  |  |      | 15,560  |   |      |   | 20,784    |      |  |   | 15,501    |  
|Salaries and employee benefits                                                    |  |      | 18,243  |   |      |   | 13,241    |      |  |   | 12,427    |  
|Occupancy and equipment expense                                                   |  |      | 2,457   |   |      |   | 2,270     |      |  |   | 1,892     |  
|Merger, integration and restructuring expense                                     |  |      | (21     | ) |      |   | 121       |      |  |   | 7,181     |  
|Other operating expense                                                           |  |      | 9,999   |   |      |   | 9,509     |      |  |   | 7,553     |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Total expenses                                                                    |  |      | 46,238  |   |      |   | 45,925    |      |  |   | 44,554    |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Income before income taxes and equity in undistributed net income of subsidiaries |  |      | 93,681  |   |      |   | 62,409    |      |  |   | 173,299   |  
|Income tax expense (benefit)                                                      |  |      | (375    | ) |      |   | (9,062    | )    |  |   | (6,555    | )
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Income before equity in undistributed net income of subsidiaries                  |  |      | 94,056  |   |      |   | 71,471    |      |  |   | 179,854   |  
|Equity in undistributed net income of bank subsidiaries                           |  |      | 80,396  |   |      |   | 72,794    |      |  |   | (31,093   | )
|Equity in undistributed net income of non-bank subsidiaries                       |  |      | 19,903  |   |      |   | 12,352    |      |  |   | (20,954   | )
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|Net Income                                                                        |  | $    | 194,355 |   |      | $ | 156,617   |      |  | $ | 127,807   |  
|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  





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Note 23Condensed Parent Company Financial Information (continued)



Condensed Parent Company Statements of Cash Flows



|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|-------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|For years ended December 31,                                               |  | 2004 |          |   | 2003 |   |         | 2002 | 
|Operating Activities                                                       |  |      |          |   |      |   |         |      |  |   |          |  
|Net income                                                                 |  | $    | 194,355  |   |      | $ | 156,617 |      |  | $ | 127,807  |  
|Adjustments to reconcile net income to net cash from operating activities: |  |      |          |   |      |   |         |      |  |   |          |  
|Equity in undistributed net income of bank subsidiaries                    |  |      | (80,396  | ) |      |   | (72,794 | )    |  |   | 31,093   |  
|Equity in undistributed net income of non-bank subsidiaries                |  |      | (19,903  | ) |      |   | (12,352 | )    |  |   | 20,954   |  
|Depreciation and amortization                                              |  |      | 1,068    |   |      |   | 969     |      |  |   | 772      |  
|Net loss (gain) on sales of assets                                         |  |      | (5,598   | ) |      |   | (535    | )    |  |   | 151      |  
|Net change in other assets and liabilities                                 |  |      | 8,779    |   |      |   | (947    | )    |  |   | (25,700  | )
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|Net cash from operating activities                                         |  |      | 98,305   |   |      |   | 70,958  |      |  |   | 155,077  |  
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|Investing Activities                                                       |  |      |          |   |      |   |         |      |  |   |          |  
|Capital contributions to bank subsidiaries                                 |  |      |         |   |      |   |        |      |  |   | (12,449  | )
|Capital return (contributions) to non-bank subsidiaries                    |  |      | 8,000    |   |      |   | (6,520  | )    |  |   | (119,677 | )
|Loan to subsidiary                                                         |  |      | (9,880   | ) |      |   | (27,065 | )    |  |   |         |  
|Collection of loans from subsidiaries                                      |  |      | 62,359   |   |      |   | 11,901  |      |  |   | 69,635   |  
|Securities available for sale:                                             |  |      |          |   |      |   |         |      |  |   |          |  
|Proceeds from maturities and payments                                      |  |      | 9,000    |   |      |   | 753     |      |  |   | 9,317    |  
|Proceeds from sales                                                        |  |      | 17,699   |   |      |   | 12,427  |      |  |   | 4,698    |  
|Purchases                                                                  |  |      | (6,881   | ) |      |   | (5,491  | )    |  |   | (4,000   | )
|Purchases of premises and equipment                                        |  |      | (867     | ) |      |   | (526    | )    |  |   | (1,379   | )
|Cash paid in acquisitions                                                  |  |      | (14,406  | ) |      |   | (7,970  | )    |  |   | (44,699  | )
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|Net cash provided by (used in) investing activities                        |  |      | 65,024   |   |      |   | (22,491 | )    |  |   | (98,554  | )
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|Financing Activities                                                       |  |      |          |   |      |   |         |      |  |   |          |  
|Proceeds from issuance of debt                                             |  |      | 63,550   |   |      |   | 84,310  |      |  |   | 13,013   |  
|Repayment of debt                                                          |  |      | (40,059  | ) |      |   | (42,119 | )    |  |   |         |  
|Repayment of short-term line of credit                                     |  |      | (61,000  | ) |      |   |        |      |  |   |         |  
|Proceeds from issuance of common stock                                     |  |      | 19,929   |   |      |   | 10,869  |      |  |   | 4,243    |  
|Cash dividends and fractional shares paid                                  |  |      | (80,731  | ) |      |   | (71,008 | )    |  |   | (62,631  | )
|Treasury stock purchases                                                   |  |      | (1,588   | ) |      |   |        |      |  |   | (16,403  | )
|Other items                                                                |  |      | (1,214   | ) |      |   | 261     |      |  |   |         |  
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|Net cash used in financing activities                                      |  |      | (101,113 | ) |      |   | (17,687 | )    |  |   | (61,778  | )
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|Net change in cash and due from banks                                      |  |      | 62,216   |   |      |   | 30,780  |      |  |   | (5,255   | )
|Cash and due from banks at beginning of year                               |  |      | 32,704   |   |      |   | 1,924   |      |  |   | 7,179    |  
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  
|Cash and due from banks at end of year                                     |  | $    | 94,920   |   |      | $ | 32,704  |      |  | $ | 1,924    |  
|                                                                           |  |      |          |   |      |   |         |      |  |   |          |  



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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 24Other Matters



Legal Matters



In re Commercial Money Center, Inc. Equipment Lease Litigation in the U. S. District Court for the Northern District of Ohio, Eastern Division, MDL Case No. 1:02-CV-16000



Between August 2000 and December 2001, Sky Bank provided financing to a commercial borrower
and its affiliated entities for the purchase of three separate portfolios of commercial lease pools, and a warehouse line of credit to finance lease pools. During 2001, Metropolitan Bank and Trust Company, which was merged with Sky Bank on May 16,
2003, and Second National Bank of Warren, which was merged with Sky Bank on July 2, 2004, each provided similar financing to the same commercial borrower and its affiliated entities. These loans, with a December 31, 2004 outstanding balance of $34.4
million, are secured by assignments of the payment streams from the underlying leases, surety bonds or insurance policies, and a limited guarantee from the sole member of the commercial borrower.



Upon default of these commercial loans, Sky Bank (and its predecessors
Metropolitan and Second National) made demand for payment from Illinois Union Insurance Company (IU), RLI Insurance Company (RLI) and Royal Indemnity Company (Royal) under the relevant surety bonds and insurance
policies. IU, RLI and Royal (collectively, the Sureties) have failed to make the payments required under the surety bonds and insurance policies. As a result, in the spring of 2002, Sky filed suit against each of the Sureties seeking to
enforce Sky Banks rights under the surety bonds and insurance policies issued by the Sureties in connection with the commercial lease pools. Skys complaints claim breach of contract, bad faith and allege that the Sureties are liable for
the payments due to Sky under the terms of the bonds and are estopped from asserting fraud as a defense to paying any claims under the bonds. Similar suits were filed by Metropolitan in June 2002 and by Second National in April and June 2002. In
October 2002, the suits were consolidated for pretrial purposes with more than 35 other lawsuits involving similar claims in the United States District Court for the Northern District of Ohio, Eastern Division, under the Federal Multi-district
Litigation (MDL) Rules.



On January 31, 2003, Sky
Bank and the other Claimants in the MDL Proceeding (MDL 02CV16000, Docket No. 1490) filed a consolidated Motion for Judgment on the Pleadings (the Motion) seeking a determination that the Sureties are liable, as a matter of law, under
the relevant surety bonds and insurance policies. The Motion is pending with the MDL Court and discovery in the MDL Proceeding is continuing. Amendments to the pleadings are currently due 14 days after the Court rules on the Motions. Sky is prepared
to amend its complaint to include additional claims against the Sureties.



The key defense of the Sureties in denying Sky Banks claims under the surety bonds is that they were fraudulently induced by the originator of the commercial leases to issue the surety bonds in the first
instance. The Sureties have also asserted related defenses that the underlying equipment leases are invalid, usurious or otherwise unenforceable. Sky Bank believes that none of these defenses can defeat Sky Banks claims under the surety bonds,
which, in the view of Sky Bank, provide for absolute and unconditional guarantees of payment.



Sky Bank believes that the language of the surety bonds (and in the case of IU, the insurance policies) clearly provides that the Sureties are responsible to Sky Bank, as the Obligee or Named Insured under the bonds,
for the underwriting of the lessees and leases, including all issues of fraud, and that the Sureties waived any defense of fraud to claims under the bonds. Sky Bank also believes that the surety bonds make it clear that the Sureties were responsible
for the performance of the originator of the leases as sub-servicer of the leases. Finally, Sky Bank believes that the surety bonds provide that if the Obligee or Named Insured fails to receive a payment due under a lease from the sub-servicer, a
default under the lease occurs, and the Sureties payment obligations are triggered. Relevant excerpts from the RLI and Royal surety bonds are set forth below:



The Surety is responsible to the Obligee for the individual underwriting of each lessee and Lease, including but not
limited to, all related credit matters, issues of fraud, bankruptcy and the accurate and timely performance by any sub-servicer designated by Surety, and Surety shall assert no defenses to any claim under this Bond as a result of any of the
foregoing. This Lease Bond and the Suretys obligation constitute an unconditional and absolute guarantee of payment, not collection. If the Obligee fails to receive a payment under the Lease from the Surety, as servicer, or from any
sub-servicer, on the scheduled due date, a default under the Lease occurs. Upon such default, the Surety shall have thirty (30) days to cause the default to be remedied. The Surety shall make payment on this bond to the Obligee upon receipt of
demand from the Obligee, within this 30-day period.



Relevant excerpts from the IU insurance policies are set forth below:



The issuance of this endorsement shall represent the Companys approval of the individual underwriting and execution and delivery of each Lease,
including, but not limited to, all related credit matters, issues of fraud, bankruptcy, validity, legality and enforceability and the Company shall pay all claims hereunder unconditionally and assert no defenses to any claim under this endorsement
as a result of any of the foregoing or based on any act or omission of the master-servicer or sub-servicer. If the named insured fails to receive a payment under the lease from the lesseethen default under the lease occurs. Upon such default,
the Company shall have thirty (30) days to cause the default to be remedied. Upon the passage of such 30-day period, then the Company shall make payment hereunder to the named insured in immediately available funds.



Furthermore, Sky Bank believes that as a further inducement to Sky Bank to
extend credit, the Sureties issued representation letters and legal opinions, which confirmed the validity and enforceability of its surety bonds, and in effect acknowledged the assignment of the bonds to Sky Bank.



Sky Financial has reviewed the relevant matters of fact and law with its
special counsel and believes that it has substantial and meritorious claims against the Sureties, due in part to the fact that, under the terms of the bonds, the Sureties undertake the responsibility for all credit matters and any fraud that may
have occurred in the underwriting of the credit, and waive all defenses associated with the bonds, including defenses of fraud. Sky Financial has and will continue to vigorously assert all the rights and remedies available to it to obtain payment
under the bonds. While the ultimate outcome of this matter cannot be determined at this time, Sky Financial management does not believe that the outcome of any of these pending legal proceedings will materially affect the consolidated financial
position or results of operations of Sky Financial.



Scott M. Lukouski, et.
al. vs. National Marine, Inc., Sky Financial Group, Inc., et. al., Case No. 2004 CV 685 (Court of Common Pleas, Erie County, Ohio)



In October 2004, Sky Financial was one of the named defendant lenders in a purported class action complaint seeking remedies related to the financing of watercraft by
Second National Bank of Warren, a predecessor of Sky Bank. In the acquisition, Sky Financial assumed a portfolio of indirect boat loans originated through National Marine, Inc. The complaint alleges that



60



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##### Table of Contents

Note 24Other Matters (continued)



defendants engaged in fraudulent activities in connection with the purchase, sale and financing of watercraft, and that defendant lenders
failed to follow prudent banking practices in the purchase of commercial paper from National Marine. The complaint seeks injunctive and equitable relief, compensatory and punitive damages and other remedies on behalf of a class of borrowers. Sky
Financial intends to vigorously defend against these claims, and believes that it has meritorious claims under certain insurance policies relating thereto. Sky Financial does not believe that the outcome of this proceeding is likely to have a
materially adverse effect on the consolidated financial position or results of operations of Sky Financial.



In November 2004, Sky Financial filed a declaratory judgment action in Trumbull County (Case No.: 2004 CV 2779) and asserted jurisdiction of the class
action in Trumbull County Common Pleas Court, which has jurisdiction over the Receiver and assets of National Marine. On January 4, 2005, an order was signed by the Erie County Court transferring venue to Trumbull County Common Pleas Court.



Sky Financial and its affiliates are, from time to time,
involved in various lawsuits and claims, which arise in the normal course of business. Some of these proceedings seek relief or damages that are substantial, and in some instances are filed as class actions. Nonetheless, based upon the advice of
counsel, management is of the opinion that any liabilities that may result from these lawsuits and claims will not have a material adverse effect on the consolidated financial condition or results of operations of Sky Financial.



Cash and Due from Banks



Sky Financials subsidiary bank is required to have cash on hand or on deposit with the Federal Reserve Bank to meet its regulatory
reserve requirements. The reserve requirements at December 31, 2004 and 2003 was $59,421 and $36,495, respectively. These balances do not earn interest.



Treasury Shares



Included in treasury shares at December 31, 2004 and 2003 are 18 and 18, respectively, of shares held in rabbi trusts for certain employees of Sky Financial.



Note 25Quarterly Financial Information (Unaudited)



|                                    |  |       |         |        |   |         |  |        |         |  |   |        
|----------------------------------- |  | ----- | ------- | ------ | - | ------- |  | ------ | ------- |  | - | -------
|                                    |  | First |         | Second |   | Third   |  | Fourth
|2004                                |  |       |         |        |   |         |  |        |         |  |   |        
|Total interest income               |  | $     | 149,021 |        | $ | 148,027 |  | $      | 178,772 |  | $ | 186,123
|Net interest income                 |  |       | 101,803 |        |   | 102,687 |  |        | 122,516 |  |   | 124,305
|Provision for credit losses         |  |       | 6,665   |        |   | 11,020  |  |        | 8,360   |  |   | 11,615 
|Income from continuing operations   |  |       | 39,952  |        |   | 40,201  |  |        | 46,148  |  |   | 48,899 
|Income from discontinued operations |  |       | 18,725  |        |   |        |  |        |        |  |   | 430    
|Net income(1)                       |  |       | 58,677  |        |   | 40,201  |  |        | 46,148  |  |   | 49,329 
|                                    |  |       |         |       
|Basic earnings per share:           |  |       |         |        |   |         |  |        |         |  |   |        
|Income from continuing operations   |  |       | 0.43    |        |   | 0.43    |  |        | 0.44    |  |   | 0.46   
|Income from discontinued operations |  |       | 0.20    |        |   |        |  |        |        |  |   |       
|Net income                          |  |       | 0.63    |        |   | 0.43    |  |        | 0.44    |  |   | 0.47   
|Diluted earnings per share:         |  |       |         |        |   |         |  |        |         |  |   |        
|Income from continuing operations   |  |       | 0.42    |        |   | 0.43    |  |        | 0.43    |  |   | 0.46   
|Income from discontinued operations |  |       | 0.20    |        |   |        |  |        |        |  |   |       
|Net income                          |  |       | 0.62    |        |   | 0.43    |  |        | 0.43    |  |   | 0.46   
|                                    |  |       |         |       
|2003                                |  |       |         |        |   |         |  |        |         |  |   |        
|Total interest income               |  | $     | 141,720 |        | $ | 150,229 |  | $      | 151,707 |  | $ | 150,407
|Net interest income                 |  |       | 90,370  |        |   | 97,021  |  |        | 100,803 |  |   | 103,049
|Provision for credit losses         |  |       | 7,500   |        |   | 8,325   |  |        | 8,325   |  |   | 9,975  
|Income from continuing operations   |  |       | 35,834  |        |   | 36,822  |  |        | 40,439  |  |   | 39,585 
|Income from discontinued operations |  |       | 236     |        |   | 687     |  |        | 1,131   |  |   | 1,883  
|Net income(2)                       |  |       | 36,070  |        |   | 37,509  |  |        | 41,570  |  |   | 41,468 
|                                    |  |       |         |       
|Basic earnings per share:           |  |       |         |        |   |         |  |        |         |  |   |        
|Income from continuing operations   |  |       | 0.43    |        |   | 0.45    |  |        | 0.41    |  |   | 0.41   
|Income from discontinued operations |  |       | 0.02    |        |   | 0.01    |  |        | 0.01    |  |   |       
|Net income                          |  |       | 0.45    |        |   | 0.46    |  |        | 0.42    |  |   | 0.41   
|Diluted earnings per share:         |  |       |         |        |   |         |  |        |         |  |   |        
|Income from continuing operations   |  |       | 0.43    |        |   | 0.44    |  |        | 0.41    |  |   | 0.41   
|Income from discontinued operations |  |       | 0.02    |        |   | 0.01    |  |        | 0.01    |  |   |       
|Net income                          |  |       | 0.45    |        |   | 0.46    |  |        | 0.42    |  |   | 0.41   

---

|(1) | The first, third and fourth quarters of 2004 reflect the impact of merger, integration and restructuring charges after tax of $225, $2,490 and $237, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The second and fourth quarter of 2003 reflect the impact of merger, integration and restructuring charges after tax of $2,265 and $710, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------



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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 26Sale of Sky Financial Solutions, Inc. and Presentation as Discontinued Operations



On March 31, 2004, Sky Financial completed the sale of its dental financing
affiliate, Sky Financial Solutions. Sky Financial Solutions has been reported as a discontinued operation and the consolidated financial statements for all periods presented have been reclassified to reflect this presentation. Sky Financial
Solutions results of operations included revenues of $39,356, $32,969 and $23,516 and pre-tax net income (loss) of $29,503, $6,242 and $(6,686) for 2004, 2003 and 2002, respectively.



Sky Financial Solutions was sold to MBNA on March 31, 2004 for $84,716. The closing equity of Sky Financial Solutions was
$50,242, resulting in an initial gain of $34,474. Sky Financial incurred an additional $3,234 in professional fees and other contractual obligations related to the transaction for a final calculated pre-tax gain of $31,240. Separately, Sky Financial
recorded merger, integration and restructuring costs of $346 related primarily to employee costs. A separate asset transfer agreement included $115,975 in Sky Bank portfolio loans, which represent unique products offered by Sky Bank to accommodate
Sky Financial Solutions clients. These loans were sold to MBNA at par value.



The major classes of assets and liabilities included in the consolidated balance sheets as of December 31, 2003 are as follows:



|                                                               |  |      |        
|-------------------------------------------------------------- |  | ---- | -------
|                                                               |  | 2003
|Assets                                                         |  |      |        
|Cash and interest-earning deposits with financial institutions |  | $    | 91,763 
|Net loans                                                      |  |      | 763,408
|Other assets                                                   |  |      | 19,594 
|                                                               |  |      |        
|Total assets                                                   |  | $    | 874,765
|                                                               |  |      |        
|Liabilities                                                    |  |      |        
|Debt                                                           |  | $    | 799,990
|Accrued interest payable and other liabilities                 |  |      | 22,508 
|                                                               |  |      |        
|Total liabilities                                              |  | $    | 822,498
|                                                               |  |      |        



The Sky Financial
Solutions sales agreement contains a contingency based upon future charge-offs that may result in an adjustment to increase or decrease the sales price in future periods. Based on historical experience and expected future performance, management
does not believe that this provision will have a significant impact on future earnings, cash flows or financial position.



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##### Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



During the fiscal years ended December 31, 2004 and December 31, 2003, there were no disagreements between Sky Financial and Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Deloitte & Touche LLPs satisfaction, would have caused Deloitte & Touche LLP to make reference
to the subject matter of the disagreement in connection with its reports on Sky Financials consolidated financial statements for such periods.



Crowe Chizek and Company LLC (Crowe Chizek), served as Sky Financials independent public accountants for the 2002 fiscal year. Crowe
Chizek declined to be reappointed in order to provide Sky Financial various consulting and outsourcing services. Sky Financials Board of Directors, upon recommendation by the Audit Committee of the Board of Directors, approved the change in
independent public accountants. The change in independent accountants was effective with the filing of the 2002 Annual Report on Form 10-K.



During the fiscal year ended December 31, 2002, there were no disagreements between Sky Financial and Crowe Chizek on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Crowe Chizeks satisfaction, would have caused Crowe Chizek to make reference to the subject matter of the disagreement in
connection with its reports on Sky Financials consolidated financial statements for such period.



Item 9A. Controls and Procedures



Sky Financials management carried out an evaluation, under the supervision and with the participation of the chief executive officer and the chief financial
officer, of the effectiveness of the design and operation of Sky Financials disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2004, pursuant to Exchange Act
Rule 13a-15. Based upon that evaluation, the chief executive officer along with the chief financial officer concluded that Sky Financials disclosure controls and procedures as of December 31, 2004, are effective in timely alerting them to
material information relating to Sky Financial (including its consolidated subsidiaries) required to be included in Sky Financials periodic filings under the Exchange Act.



Managements Report on Internal Control Over Financial Reporting



The management of Sky Financial Group is responsible for establishing and maintaining adequate internal control over financial reporting.
Sky Financials internal control over financial reporting is a process designed under the supervision of the companys chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the companys financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.



Sky Financials management assessed the effectiveness of the companys internal control over financial reporting
as of December 31, 2004 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on the assessment, management determined that, as
of December 31, 2004, the companys internal control over financial reporting is effective, based on those criteria. Managements assessment of the effectiveness of the companys internal control over financial reporting as of
December 31, 2004 has been audited by Deloitte and Touche LLP, an independent registered public accounting firm, as stated in their report appearing on page 64.



|                                                |  |                                                     
|----------------------------------------------- |  | ----------------------------------------------------
|LOGO                                            |  | LOGO                                                
|Marty E. Adams                                  |  | Kevin T. Thompson                                   
|Chairman, President and Chief Executive Officer |  | Executive Vice President and Chief Financial Officer



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders of Sky Financial
Group, Inc.

Bowling Green, Ohio



We have audited managements assessment, included in the accompanying Managements Report on Internal Control Over Financial Reporting, that Sky Financial
Group, Inc. and subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.



A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive
and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.



Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness
of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.



We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended December 31, 2004 of the Company and our report dated February 16, 2005 expressed an unqualified opinion on those financial statements.



LOGO



Deloitte and Touche LLP

Cleveland, Ohio

February 16, 2005



64



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##### Table of Contents

Item 9B. Other Information



No changes in Sky
Financials internal control over financial reporting have come to managements attention that have materially affected, or are reasonably likely to materially affect, Sky Financials internal control over financial reporting.



PART III



Item 10. Directors and Executive Officers of Registrant



The information contained under the captions Election of Directors, Beneficial Ownership of the Companys Common Stock, and Section 16(a) Beneficial Ownership Reporting Compliance of Sky
Financials 2005 Proxy Statement filed with the Securities and Exchange Commission is incorporated herein by reference in response to this item.



The following table sets forth the names and ages and business experience of each of the executive officers of Sky Financial. Each executive officer of
Sky Financial is appointed by the Board of Directors on an annual basis and serves at the pleasure of the Board.



|                          |  |     |  |                                                                                                                                                                                                                                         |  |               
|------------------------- |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Executive Officer         |  | Age |  | Position With Company or Subsidiary and Experience                                                                                                                                                                                      |  | Officer Since*
|Marty E. Adams            |  | 52  |  | Chairman, President and Chief Executive Officer of Sky Financial; formerly President and Chief Operating Officer of Sky Financial and President and Chief Executive Officer of Sky
Bank                                                 |  | 1977          
|                          |  |     | 
|Frank J. Koch             |  | 51  |  | Executive Vice President and Senior Credit Officer of Sky Financial, and Senior Credit Officer of Sky Bank                                                                                                                              |  | 1988          
|                          |  |     | 
|W. Granger Souder, Jr.    |  | 44  |  | Executive Vice President, General Counsel and Secretary of Sky Financial and Secretary of Sky Bank                                                                                                                                      |  | 1989          
|                          |  |     | 
|Les Starr                 |  | 53  |  | Executive Vice President/Operations and Information Technology; formerly Senior Vice President and Director/Information Technology for Michigan National Bank.                                                                          |  | 2002          
|                          |  |     | 
|Kevin T. Thompson         |  | 51  |  | Executive Vice President and Chief Financial Officer of Sky Financial and Treasurer of Sky Bank                                                                                                                                         |  | 1998          
|                          |  |     | 
|John F. Craven            |  | 51  |  | Division Executive Vice President and Chief Operations Officer; formerly President, Textron Business Services, Inc.                                                                                                                     |  | 2004          
|                          |  |     | 
|Perry C. Atwood           |  | 50  |  | Senior Vice President, Director of Sales of Sky Financial; formerly Director of Sales of Sky Bank                                                                                                                                       |  | 2000          
|                          |  |     | 
|Phillip C. Clinard        |  | 55  |  | Senior Vice President/Change Management Officer of Sky Financial; formerly Senior Vice President of Mid Am Bank.                                                                                                                        |  | 1975          
|                          |  |     | 
|Thomas A. Sciorilli       |  | 57  |  | Chief Human Resources Officer of Sky Financial; formerly Senior Vice President/Human Resources and Administration of Penn National Insurance.                                                                                           |  | 2001          
|                          |  |     | 
|Curtis E. Shepherd        |  | 39  |  | Senior Vice President/Marketing and Product Development of Sky Financial; formerly Executive Vice President, Retail and Marketing of Sky BankOhio Bank Region; formerly Senior Vice
President of Marketing of Ohio Bank                |  | 1997          
|                          |  |     | 
|Richard R. Hollington III |  | 41  |  | Regional President, Greater Cleveland Region; formerly Executive Vice President, Chief Executive Officer of Sky Trust and Corporate Director of Financial Services; formerly Senior Vice
President/Integration Manager of Sky Financial |  | 1996          
|                          |  |     | 
|Robert E. Morrison**      |  | 47  |  | President and Chief Executive Officer of Sky Trust; formerly President and Chief Operating Officer of Sky Trust; formerly Senior Vice President with Key Corp.                                                                          |  | 2001          
|                          |  |     | 
|Christopher L. Whitford   |  | 40  |  | Division Executive Vice President and Chief Technology Officer of Sky Financial; formerly Chief Technology Officer of Munder Capital Management                                                                                         |  | 2002          

---

|* | Includes period in which executive officer was an officer of a subsidiary or acquired company.
|- | ----------------------------------------------------------------------------------------------

|** | Served in this capacity until February 17, 2005.
|-- | ------------------------------------------------



65



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##### Table of Contents

Item 11. Executive Compensation



The information
contained under the captions Executive Compensation and Compensation Committee Report on Executive Compensation of Sky Financials 2005 Proxy Statement filed with the Securities and Exchange Commission is incorporated
herein by reference in response to this item.



Item 12. Security Ownership of Certain Beneficial Owners and Management



The information contained under the captions Election of Directors, Beneficial Ownership of the Companys Common Stock and Executive Compensation of Sky Financials 2005
Proxy Statement filed with the Securities and Exchange Commission is incorporated herein by reference in response to this item.



Item 13. Certain Relationships and Related Transactions



The information contained under the caption Certain Transactions and Relationships of Sky Financials 2005 Proxy Statement filed with the Securities and Exchange Commission is incorporated herein by reference in response to
this item.



Item 14. Principal Accounting Fees and Services



The information contained under the caption Audit Committee Report of Sky Financials 2005 Proxy Statement filed with the Securities and Exchange Commission is incorporated herein by reference in response to this item.



PART IV



Item 15. Exhibits, Financial Statement Schedules



(a) The following documents are filed as part of this report:



|    |  |                                                                                                        |  |                   
|--- |  | ------------------------------------------------------------------------------------------------------ |  | ------------------
|    |  |                                                                                                        |  | Pages in Form 10-K
|(1) |  | Financial Statements:                                                                                  |  |                   
|    |  | Report of Independent Registered Public Accounting Firm                                                |  | 30                
|    |  | Consolidated Balance Sheets at December 31, 2004 and 2003                                              |  | 31                
|    |  | Consolidated Statements of Income for the three years ended December 31, 2004                          |  | 32                
|    |  | Consolidated Statements of Changes in Shareholders Equity for the three years ended December 31, 2004 |  | 33                
|    |  | Consolidated Statements of Cash Flows for the three years ended December 31, 2004                      |  | 34                
|    |  | Notes to Consolidated Financial Statements                                                             |  | 35                



All schedules are omitted because
they are not applicable or the required information is shown in the financial statements or notes thereto.



The following exhibits required by Item 601 of Regulation S-K are filed as part of this report:



FORM 10-K EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit                                                                                                                                                                                                                                       
|3.1           |  | Sky Financials Seventh Amended and Restated Articles of Incorporation (incorporated by reference from Exhibit 3 of the Form 10-Q of Sky Financial for the quarterly period ended March
31, 2004 filed as of May 10, 2004)                    
|              | 
|3.2           |  | Sky Financials Amended and Restated Code of Regulations (incorporated by reference from Exhibit 3.2 of the Form 10-K of Sky Financial for the year ended December 31, 2001 filed as of
March 27, 2002)                                       
|              | 
|4.1           |  | Shareholder Rights Agreement dated as of July 21, 1998, between Sky Financial and The Citizens Banking Company, as Rights Agent (incorporated by reference from Exhibit 4 of Form S-4
Registration Statement No. 333-60741 of Sky Financial)  
|              | 
|10.1          |  | Sky Financials Amended and Restated 1998 Stock Option Plan for Nonemployee Directors (incorporated by reference from Exhibit 4(d) of the Form S-8 Registration Statement No. 333-59312 of
Sky Financial)                                     
|              | 
|10.2          |  | Sky Financials 1998 Stock Option Plan for Employees (incorporated by reference from Appendix H of the Joint Proxy Statement/Prospectus in Form S-4 Registration Statement No. 333-60741
of Sky Financial)                                    
|              | 
|10.3          |  | Sky Financials 2002 Stock Option and Stock Appreciation Rights Plan (incorporated by reference from Exhibit 10.3 of the Form 10-K of Sky Financial for the year ended December 31, 2002
filed as of March 3, 2003)                           
|              | 
|10.4          |  | Sky Financials 2004 Restricted Stock Plan (incorporated by reference from Appendix B of the Proxy Statement of Sky Financial for 2004 Annual Meeting of Shareholders filed as of March 4,
2004)                                              
|              | 
|10.5          |  | Form of Indemnification Agreement between Sky Financial and individual directors and certain officers (incorporated by reference from Exhibits 99.1, 99.2 and 99.3 of Sky Financials
Current Report on Form 8-K filed as of February 2, 2005)
|              | 
|10.6          |  | Employment Agreement between Sky Financial and Marty E. Adams dated March 1, 2004 (incorporated by reference from Exhibit 10.1 of Form 10-Q of Sky Financial for the quarterly period ended
June 30, 2004 filed August 5, 2004)               



66



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##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                                              
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit                                                                                                                                                                                                                                                                                                      
|10.7           |  | Employment Agreement by and among Sky Financial, The Citizens Banking Company and Frank J. Koch (incorporated by reference from Exhibit 10.11 to the Form 10-K of Sky Financial for the year
ended December 31, 1998 filed as of March 16, 1999)                                                             
|               | 
|10.8           |  | Form of Employment Agreement between Sky Financial and certain officers of Sky Financial, including Kevin T. Thompson, W. Granger Souder, Jr. and Les V. Starr. (incorporated by reference to
Exhibit 10.10 to the Form 10-K of Sky Financial for the year ended December 31, 2002 filed as of March 3, 2003)
|               | 
|10.9           |  | Sky Financials Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Pension Plan (effective January 1, 2004)                                                                                                                                                                            
|               | 
|10.10          |  | First Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing and 401(k) Plan (effective March 9, 2004)                                                                                                                                                                               
|               | 
|10.11          |  | Second Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Pension Plan (effective July 1, 2004)                                                                                                                                             
|               | 
|10.12          |  | Third Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Pension Plan (effective January 1, 2005)                                                                                                                                           
|               | 
|10.13          |  | Sky Financials Non-Qualified Retirement Plan (incorporated by reference from Exhibit 10.3 of the Form 10-K of Sky Financial for the year ended December 31, 2001 filed as of March 27,
2002)                                                                                                                
|               | 
|10.14          |  | Fourth Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan (As Amended and Restated Effective January 1, 2001) (incorporated by reference from Exhibit 10.19 to the Form
10-K of Sky Financial for the year ended December 31, 2002 filed as of March 3, 2003)                          
|               | 
|10.15          |  | Fifth Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan (As Amended and Restated Effective January 1, 2001) (incorporated by reference from Exhibit 10.20 to the Form
10-K of Sky Financial for the year ended December 31, 2002 filed as of March 3, 2003)                           
|               | 
|10.16          |  | Sixth Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan (Effective December 15, 2002)                                                                                                                                                                                                 
|               | 
|10.17          |  | Three Rivers Bank and Trust Company Pension Trust (as Amended and Restated Effective January 1, 1997)  (incorporated by reference to Exhibit 10.21 from the Form 10-K of Sky Financial
for the year ended December 31, 2002 filed as of March 3, 2003)                                                      
|               | 
|10.18          |  | Second Amendment to the Three Rivers Bank and Trust Company Pension Trust (as Amended and Restated Effective January 1, 1997) (incorporated by reference from Exhibit 10.22 to the Form 10-K of
Sky Financial for the year ended December 31, 2002 filed as of March 3, 2003)                                
|               | 
|10.19          |  | Second National Bank Defined Benefit Plan (Frozen)                                                                                                                                                                                                                                                           
|               | 
|10.20          |  | Pennsylvania Capital Bank 401(k) Plan (Frozen)                                                                                                                                                                                                                                                               
|               | 
|11.1           |  | Statement Re: Computation of Per Share Earnings (incorporated by reference from the information contained in Note 13 Earnings Per Common Share on page 49 of Sky Financials
2004 Annual Report on Form 10-K)                                                                                              
|               | 
|14.1           |  | Code of Ethics for Senior Financial Officers (filed as Exhibit 14.2 from Registrants Current Report on Form 8-K filed on July 31, 2003, and incorporated herein by
reference)                                                                                                                               
|               | 
|20.1           |  | Sky Financials Proxy Statement for its 2005 Annual Meeting (incorporated by reference from the information contained in Sky Financials 2005 Proxy Statement)                                                                                                                                               
|               | 
|21.1           |  | Subsidiaries of Sky Financial                                                                                                                                                                                                                                                                                
|               | 
|23.1           |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                             
|               | 
|23.2           |  | Consent of Crowe Chizek and Company LLC                                                                                                                                                                                                                                                                      
|               | 
|24.1           |  | Power of Attorney                                                                                                                                                                                                                                                                                            
|               | 
|31.1           |  | Rule 13a-14(a)/15-d-14(a) Certification of Chief Executive Officer                                                                                                                                                                                                                                           
|               | 
|31.2           |  | Rule 13a-14(a)/15-d-14(a) Certification of Chief Financial Officer                                                                                                                                                                                                                                           
|               | 
|32.1           |  | Section 1350 Certification of Chief Executive Officer                                                                                                                                                                                                                                                        
|               | 
|32.2           |  | Section 1350 Certification of Chief Financial Officer                                                                                                                                                                                                                                                        
|               | 
|99.1           |  | Report of Crowe Chizek and Company LLC for Year Ended December 31, 2002                                                                                                                                                                                                                                      



(b) Reports on Form 8-K



Reports on 8-K filed during the fourth quarter and through the date of
this Form 10-K filing are as follows:



Sky Financial filed a
report on Form 8-K with the Securities and Exchange Commission as of January 22, 2004, reporting its fourth quarter earnings.



Sky Financial filed a report on Form 8-K with the Securities and Exchange Commission as of January 8, 2004, announcing that it had entered into an
Agreement and Plan of Merger with Second Bancorp, Incorporated, located in Warren, Ohio, and its wholly-owned subsidiary, Second National Bank.



Current report on Form 8-K dated October 23, 2003 filing Investor Slides presented to a group of current and potential investors on October 23, 2003.



Sky Financial filed a report on Form 8-K with the Securities
and Exchange Commission as of October 16, 2003, reporting its third quarter earnings.



67



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##### Table of Contents

Signatures



Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                          |  |                                                     
|------------------------- |  | ----------------------------------------------------
|SKY FINANCIAL GROUP, INC.
|                          | 
|By:                       |  | /s/ Kevin T. Thompson                               
|                          |  | Kevin T. Thompson                                   
|                          |  | Executive Vice President and Chief Financial Officer
|                          |  | February 18, 2005                                   



Pursuant to the requirement of the
Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.



|                                |  |                      
|------------------------------- |  | ---------------------
|Signatures                      |  |                      
|Marty E. Adams*                 |  | Thomas J. OShane*   
|Director/Chairman/President/CEO |  | Director             
|February 18, 2005               |  | February 18, 2005    
|                                | 
|Kevin T. Thompson*              |  | Gregory L. Ridler*   
|Executive Vice President/CFO    |  | Director             
|February 18, 2005               |  | February 18, 2005    
|                                | 
|George N. Chandler II*          |  | Emerson J. Ross, Jr.*
|Director                        |  | Director             
|February 18, 2005               |  | February 18, 2005    
|                                | 
|Robert C. Duvall*               |  | C. Gregory Spangler* 
|Director                        |  | Director             
|February 18, 2005               |  | February 18, 2005    
|                                | 
|Marylouise Fennell*             |  | Joseph N. Tosh II*   
|Director                        |  | Director             
|February 18, 2005               |  | February 18, 2005    
|                                | 
|D. James Hilliker*              |  | R. John Wean III*    
|Director                        |  | Director             
|February 18, 2005               |  | February 18, 2005    
|                                | 
|Fred H. Sam Johnson III*      |  |                      
|Director                        |  |                      
|February 18, 2005               |  |                      
|                                | 
|Jonathan A. Levy*               |  |                      
|Director                        |  |                      
|February 18, 2005               |  |                      
|                                | 
|Gerard P. Mastroianni*          |  |                      
|Director                        |  |                      
|February 18, 2005               |  |                      

---

|* | The undersigned attorney-in-fact, by signing his name below, does hereby sign this Report on Form 10-K on behalf of the above- named officers and directors pursuant to a power of
attorney executed by such persons and filed with the Securities and Exchange Commission contemporaneously herewith.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|    |  |                      
|--- |  | ---------------------
|By: |  | /s/ Kevin T. Thompson
|    |  | Kevin T. Thompson    
|    |  | Attorney-In-Fact     



68